LETTER: Insurance companies walk a financial tightrope

Editor:

The stories of post-hurricane difficulties with Florida's insurance companies are tragic, but not unexpected - if you were paying attention. Most insured homeowners have no idea how the insurance industry works, and it may be one of the most important financial institutions in your family's life.

Insurance companies are usually "for profit" enterprises, like nearly all companies in the marketplace. Even if they were non-profit entities, they would still need to cover their claims with their existing financial assets - just like you. They are not a bottomless purse, able to pay huge claims that surpass their underwriting forecasts. (Have you never been caught short on paying some bills that you didn't expect?)

To protect themselves from unforeseen hazards - like major hurricanes - the carriers pay for reinsurance and pass on the costs to you in your premium. Even then, just like you, they often get their forecasts wrong, either buying untouched reinsurance, or not buying enough. If they are too pessimistic in their forecast, their premiums will not be competitive in the marketplace, and you will buy cheaper insurance. The trick is to get it right - on both sides!

Perhaps the real solution is found in our own backyard. Should mobile and "manufactured" homes be allowed as permanent dwelling places? In a hurricane, they are normally "gone with the wind," and not adequate for the Florida weather environment. Let's face it - the most effective insurance is building strong, storm-resistant structures, away from known surge (flood) zones!

Dick Nelson

Punta Gorda