Some years ago, my colleague Valerie Lucas did an analysis of data from the Emergency Management Accreditation Program (EMAP) and found that emergency managers performed better in preparedness and response than in mitigation and recovery. This was not altogether surprising since many emergency managers at the time came primarily from tactical or operational backgrounds. The skills developed over a career in various emergency services were easily transferred to preparedness and response. However, mitigation and recovery are strategic in nature and require a more nuanced approach that is very different from that required for operational tasks. As emergency management has evolved, so has the need for emergency managers to be more strategic in their thinking.
This need for strategic thinking demands that emergency managers be more adept at identifying and addressing strategic issues that can affect community restoration, particularly as related to mitigation and recovery. It is only within the last few years that we've come to realize the importance of planning for long term recovery and to recognize the value of the harm reduction achieved through mitigation. As we've become more cognizant of the strategic issues involved, we have begun to realize that our approach to community restoration has serious systemic issues. This is particularly true when dealing with issues related to insurance.
Insurance becomes important when one realizes that most of the funding provided for recovery and reconstruction comes from insurance and not from the government. Following Hurricane Harvey in 2017, for example, insurance accounted for 61 percent of assistance dollars, amounting to $16.2 billion. Of that 45% was provided by the National Flood Insurance Program, with the remaining 55% was provided by various private insurance. However, insurance company practices often create major barriers to community restoration.
In a 2016 documentary on Hurricane Sandy, Frontline made the case that there were significant systemic issues in the National Flood Insurance Program (NFIP). The documentary found that the federal government did not have data on whether the fees charged by insurance companies for administering the program had any relation to actual administrative costs. Further, the government had no idea what percentage of profit was being earned by the insurance companies and whether those profits were reasonable.
As costs to the NFIP continued to increase following events like Hurricane Sandy in 2012, congress began to pressure insurance companies to reduce costs. As a result, insurance companies began a program to significantly reduce the amount of payout provided to disaster victims. While much of this was accomplished by simply denying claims using a convoluted adjustment process, Frontline found evidence of fraud where reports of damage were altered to deny claims. Where these fraudulent reports were successfully challenged in court, the NFIP reimbursed court costs to the insurance companies but not to the victims.
But fraud isn’t always necessary, given the requirements that insurance companies have put in place for making claims. For example, insurance companies frequently demand itemized lists of building contents before approving a claim. These lists often request information that most homeowners don't have at the best of times, let alone following the destruction of their home and records. This information may include such things as date and place of purchase, initial cost, and current market value. In addition, there is may be a factor for depreciation which further lowers the amount of the claim. In a series of books related to insurance and recovery author Sean M Scott discusses these practices and methods for working with an insurance adjuster. In his presentations, he demonstrates how the contents of the “kitchen junk drawer” or the bathroom cosmetics drawer can have high replacement costs that can never be documented.
One further area of concern related to insurance is the proliferation of insurance fraud by unscrupulous and often unlicensed contractors. This is common after disasters. These contractors will approach homeowners while they are still in a state of shock from the disaster and get them to sign contracts for home repair. In many cases these contractors will convince the homeowner to allow the contractor to bill and receive payment directly from the insurance company. If any work is actually done, it is often shoddy and subpar.
Our concern as emergency managers is that if the system is failing the people we are intending to serve, we need to be advocates for reforming the system. For too long we have ignored strategic issues such as these and focused solely on response related issues. Response lasts a relatively short time compared to community restoration, the goal that is our ultimate end state. A flawed system that prevents us achieving that goal does no one any good. it is time we looked beyond response to consider how we can do the most long-term good for those we serve and that means becoming involved in larger strategic issues such as insurance reform.
