By Cedric E. Stephens, Contributor 
QUESTION: THE recent floods damaged my 10-year old family home in Clarendon. The cost of repairs will amount to around $50,000. The house has concrete block walls and a decramastic tile roof. I estimate its value at $4.5 million. Will I be able to get insurance now? With the approaching hurricane season I am now becoming worried. Can you suggest anything?
- M.T.,
May Pen P.O.,
Clarendon.
Answer: Many thanks for raising a very topical issue. Your questions links what will soon be dubbed as the May 2002 floods with the hurricane season, the supply of insurance and disaster management. Most consumers don't see the connections. Fewer still know that this year marks the 10th anniversary that Hurricane Andrew struck Florida. It cost the insurance industry US$25 billion. Until September 11, 2001, that was the largest insurance loss in history. The impact from that hurricane was not limited to the US. It affected the availability and price of insurance here - perhaps even more than our direct hit from Gilbert.
The history lesson is important. It gives reasons for what is happening in the market today. Also, it offers clues how to solve your problem. We can 'get into the minds' of the insurers and understand how they think. The market is now in turmoil. Prices (premiums) are on the rise. September 11 is partly to blame. Last year only two of our 13 insurers made any money writing insurance against natural disasters. Since last week's floods affected nearly all parishes insurers will be more cautious. The start of the hurricane season this month makes them even more nervous. Fortunately, things have not reached the same stage as in Florida. Insurers there have begun to ditch customers to reduce risks.
The first step in the process of trying to buy insurance is to find out what caused the flood in your area. There are several types of flood in insurance. One is flooding caused directly by hurricanes. The other happens when water in a gully or river overflows or collects due the level of the land. These two causes are not unrelated. Prospective insurers will want to know why your house flooded. Was the flooding an unusual event or, does it occur every time there is a downpour? What time of year can it be expected? How long was your house affected?
House insurance policies in Jamaica do not exclude flood losses as happens in other countries. Damage due to landslides, on the other hand, is almost always never covered. Insurers evaluate the flood hazard from information on the application (proposal) form. Where there is a history of flooding - as in the case of your house - the insurer can do several things. If the risk is very high they can exclude flood losses altogether. This would not be unusual. In the jargon, they would say that you were selecting against them because of that. Selection against insurers is a no-no in all classes of insurance. Where the risk was moderate to high they could charge a higher premium and exclude losses below a certain amount. For example, they could ask you to bear the first $50,000 of all flood claims.
Finding out what caused the flooding is important for another reason. It can help you, members of your community and others take action to minimise the risks. Insurance is just one of many flood mitigation measures. Others include making changes to water courses, structures, land use and warning systems - not simply the cleaning of gullies and drains - as some persons would have us believe.
Contact an insurer, broker or agent after you have completed your homework on flood. It should help you talk with confidence on the subject. Moreover, it should increase your odds of getting coverage before we are very long into this hurricane season.
Cedric E. Stephens is an adviser on matters relating to risks and insurance. If you need free information, write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com
