Jane Hiebert-White has a special edition of Cavalcade of Risk posted at Health Affairs Blog. In addition to the usual smörgåsbord, she has a special focus on examining risk two years after Katrina. She links to some excellent articles: one on risk analysis; another being a rather depressing account of the state of health care disaster preparation; and another discussing the ways that many of Katrina’s ills simply represent a super-sized version of problems facing the country as a whole, from health care and homelessness to infrastructure and crime.
Our thoughts have also been on Katrina. USA Today featured a report on the challenges facing small businesses, which we found quite interesting. Unsurprisingly, insurance tops the list of challenges facing businesses that are trying to put the pieces back together.
“Everything I sell goes to pay insurance,” says Harrison of Loretta’s Authentic Pralines. She’s paying $17,000 a year for insurance on the 3,000-square-foot candy warehouse, compared with less than half that amount before Katrina for coverage on the same space as well as a shop in the French Quarter. (The shop is closed while the building is renovated.)
Insurance costs were already high before Katrina, and many owners couldn’t afford to fully insure their business. “You buy what you can,” says Leah Chase, who owns Dooky Chase’s restaurant in Treme, one of the oldest African-American neighborhoods in New Orleans, with her husband, Edgar. “If you can’t pay $5,000 or $10,000 a month, you don’t buy it, because (the policy) will be canceled. You never think you’ll lose everything in one shot.”
Since the storm, more businesses — small and large — are underinsuring out of financial necessity, just hoping the next hurricane won’t wipe out their livelihood. In Gulfport, Miss., Jeffrey O’Keefe of Bradford-O’Keefe Funeral Homes has one-eighth the coverage on his five funeral homes and a crematorium that he had before Katrina. Buying more, he says, would be a financial hardship. Even so, his overall premium has risen 45%, to $88,612 a year.
While there are certainly opportunities for some business sectors — banks and construction companies are booming — small family-owned businesses are among those that have been hardest hit. As they are in any community, these small businesses were the backbone of the community, and they greatly contributed to the particular character of New Orleans.
Many common business practices need to be rethought in the wake of a disaster. For example, while many small businesses would have qualified for SBA grants or loans, they ran into a catch 22: they needed a home for collateral and many no longer had homes.
While nearly one in four businesses is ringing up more sales than before Katrina, almost half of small businesses have 75% or less revenue than before — even with fewer competitors, the council found. Overall, two of every three small-business owners — those with fewer than 25 employees — are bringing in lower revenue than before Katrina, its research shows.
“What this means,” Turner says, “is staff reductions, salary cuts, the inability (of businesses) to fulfill credit obligations.”
In another status update at the two year point, Insurance Journal reports that the majority of all Katrina claims – some $40.6 billion involving 1.7 million claims – have been paid. This compares to 790,000 claims in Hurricane Andrew, with a 2006 settlement value of about $22.2 billion. The article also notes that although litigated claims have been prominent in the news, the Insurance Information Institute estimates that fewer than two percent of homeowners claims in Louisiana and Mississippi were disputed either through mediation or litigation.