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Insurance industry faces daunting reality

Monday, September 12, 2005 | 12:00 a.m. CDT; updated 10:18 p.m. CDT, Monday, July 21, 2008

Joe Moseley, vice president of Columbia-based Shelter Insurance, doesn’t know how long the company’s claims adjusters are going to be assessing hurricane damage in the South. He does know that at least one of them is planning to sign up for the Christmas drawing at the Mississippi hotel where he’s staying.

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“He told me he wanted his name in that hat, and that he’s probably going to get in on the 2006 drawing, also,” Moseley said. “They’re going to be down there for a long time, but fortunately, they’re keeping good humor.”

Gearing up for the long haul isn’t the only daunting reality for the 120 adjusters Shelter has sent to its coverage areas in Louisiana and Mississippi. In some areas, the adjusters are living without electricity or running water. On top of that, adjusters are challenged with calculating the damage — and payouts — caused by the costliest hurricane to ever hit the United States.

“This is the most expensive, worst and most complicated disaster that we’ve had to deal with for a long time,” said Jeanne Salvatore, senior vice president for public affairs with the Insurance Information Institute in New York.

Risk-modeling company AIR Worldwide estimates that Hurricane Katrina could cost the insurance industry between $17 billion and $25 billion.

For Columbia, home to the headquarters of Shelter and a regional office for State Farm Insurance, this means that two of the city’s largest employers will dedicate a large portion of their time, resources and money to their Southern customers for the next several months.

State Farm will weather a lion’s share of the impact on the insurance industry. It is the No. 1 home-insurance provider in all four states hit hardest by the hurricane. The company has already set up 28 facilities, where 3,000 employees and 2,600 catastrophe specialists are working to assess the damage.

State Farm spokeswoman Tara Eubanks said some of those employees and specialists are from mid-Missouri, but she didn’t have a specific number.

In addition to sending employees to the South, State Farm has created call centers nationwide to field the slew of claims calls. State Farm external relations specialist Karen Mayfield said it is not uncommon for the company to create call centers after a disaster.

In Columbia, more than 100 people are working in one of these centers. Mayfield said this isn’t the first time Columbia has housed a call center, but she didn’t know when the last one was established.

Although costs are piling up for State Farm, Eubanks said the company had “adequate resources” to deal with the impending costs.

“We don’t have any kind of cost estimate yet, because our main focus is getting to the people that we can get to,” Eubanks said. “Our next goal is going to be getting to those people in the harder hit, more affected areas that we haven’t had access to yet.”

Moseley didn’t have a cost estimate for Shelter, but it should be significantly less than State Farm’s burden.

Shelter policies don’t extend farther south than the Lake Pontchartrain region. The lake’s southern end forms the northern border of New Orleans, which means none of the Shelter policies are on the coast.

Homes covered by Shelter policies were mostly affected by wind damage, and Moseley said the company hadn’t had to address any damages caused by floodwaters as of Thursday night.

Moseley, who plans to remain in Jackson, Miss., until Sept. 19, spoke favorably of the company’s ability to handle the financial constraints Hurricane Katrina has induced.

“It’s nothing that we can’t handle,” he said.

Policyholders in mid-Missouri can find some relief in the fact that both Shelter and State Farm officials said the hurricane won’t change how insurance rates are calculated here.

That doesn’t mean, however, that some customers in this area won’t see higher prices.

“There will be construction costs and other factors,” State Farm’s Eubanks said. “Demand in the Gulf Coast may cause some prices to rise.”

Moseley said the hurricane won’t have a direct impact on policyholders outside the area damaged, but added, “You never say to people that prices are definitely going to stay the same.”


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