Friday, September 1, 2017

Uninsured Will Get A Rude Awakening Post Harvey

We hear that eighty percent of those in the Houston area suffering losses from flood damage do not have insurance coverage to cover their loss. Many of those people who failed to buy flood insurance will find themselves in a bit of financial pain after the storm clouds clear. The pain may be particularly harsh on two groups that society has come to depend on, the small business owners and all those private landlords that create competition in the rental market. These are the people that serve society by keeping rates lower than they would be if the market was controlled by only a few large players. Neither of these groups tend to be hoity-toity but are generally made up of hard working people that often have borrowed money to build a better future. And yes, these groups often fall into those who have passed on flood insurance because they felt it was too expensive.

For Businesses Not In Flood Plain Insurance Is Very Costly
When it comes to the owners of small businesses many of them will receive an oversized dose of misery. Not only do they face weeks where they have no income but if they carry accounts on their books, also known as receivables, many of their customers may not be able to pay. On top of this, they may suffer from having to trash inventory damaged or destroyed. In many cases for a business with little capital, this will be the final chapter and it will never reopen which creates a whole new slew of problems. This will, of course, play out over not just days or weeks but over years. This is a mess built to linger.

Uninsured Landlords Face Extra Challenge
Many landlords in Houston and surrounding areas will also be dealt a cruel hand when the waters recede and Harvey has left the area. Not only will they find their property damaged they will wake to find their tenants have simply walked away from all their flood soaked belongings and obligations. This means their now "former" landlord will face the herculean task of disposing of all the things they left behind before confronting cleaning up and rebuilding. It should be noted that renters also had little incentive to minimize damage. For landlords, this means months without rental income or even joining the large group of people that default on loans.

The bottom-line is life in Houston is about to be changed forever as the rains from Harvey have washed away any illusions that this may never happen again. Houston is prone to flooding and simply has no place to put massive amounts of rainfall. As far as all the money promised and flowing into the area from both government and different groups intent on helping those who have suffered a loss the fact is that when all is said and done it often gets diverted into a few pockets and not necessarily to where it will be most effective. As for the uninsured, I expect a "trickle down effect" will mean the pain is at least spread about. The financial burden will affect even those living far far away because as Americans we will be called to contribute to their plight through a huge disaster relief bill that may be near two hundred billion dollars.

Footnote;  In a more recent article, I argue, aid is one thing but footing the bill for rebuilding areas prone to the ravages of storms such as Hurricanes Harvey and Irma are well beyond the call of duty. The article below delves into how much this might cost the average taxpayer.

1 comment:

  1. Actually Irma is looking to be an "uninsured" loss too. I don't see things flattened by the wind (which is an insured peril, after the 7% deductible in Fla). The biggest loss is the power outage and that has extremely limited coverage, unless your building or dwelling has actual damage. Flood still not covered. If you have wind damage and flood damage the flood will just be subtracted out. I would bet that more people are insured for flood damage in Fla than in Tx.