One year after Hurricane Katrina ravaged the Gulf Coast, insurance companies have settled 95% of homeowners' claims, paying out $16.4 billion. But the industry remains mired in related lawsuits, which could raise prices and lower availability. Allstate CEO Edward Liddy tells TIME's KATHLEEN KINGSBURY how his business must evolve to keep underwriting the American Dream.
Grade Allstate's performance post-Katrina.
The promptness with which we got down there and began the claims adjusting and handling process was second to none. We've taken a leadership position to advance national catastrophic coverage. So I would give us high marks on both what we do as a business and trying to influence the public-policy debate.
But the industry hasn't won great praise.
There are a couple of players that are what I call real insurance companies, and they got out there early and did the right thing. Then there are other players that are more interested in just collecting the premiums and not in resolving claims or issues when they occur. But on balance, given how large and impressive this event was, I would give the industry high marks. Public perception is very influenced by lawsuits that a few people have filed. But if you talk to people in Louisiana, Mississippi and Texas, there's a much greater level of satisfaction.
Given all these satisfied customers, why is Allstate pulling back in coastal states?
Are we prepared to write and extend additional coverage in some states? We are not. Not until there's much more clarity around whether those states are going to honor the insurance contract.
Clarity over what?
Are they going to honor what's been the typical [differentiation] between wind and water? Sometimes that means where risks have gotten much higher than they used to be, we simply can't continue to write down there. For a while, Florida had a thousand families a day moving in, home values have escalated rapidly, and yet the rate increases we're allowed to charge [by state regulators] have not kept pace with that. So we've made some hard decisions and scaled back our coverage in Florida, the Gulf Coast and in some of the exposed areas in New York. We've raised our rates where appropriate, and we've got different deductibles. We've also added a lot of reinsurance in our business at a very substantial cost that enables us to continue to write in most areas.
Allstate faced a strong backlash from state officials when it proposed ending hail and wind coverage in Louisiana.
The reality is that we are regulated by 50 different states. They place regulations on us in terms of what we can charge. They regulate the form of the contract. They regulate where we're allowed to write, where we're not allowed to write.
Allstate has asked the government to pay for future hurricane damage. Isn't that abdicating your obligations?