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Hurricanes, tornadoes, floods, fires -- it seems one
part of the country just recovers from a natural disaster when another
kind occurs somewhere else.
To help victims of these disasters get back on their
feet, insurance companies and partner banks have devised catastrophe
claim cards, or "CAT" cards. These special debit cards
are issued by banks in partnership with property and casualty insurers
and loaded with insurance money to cover immediate, short-term needs.
"What we saw with Katrina was that checks as
a form of emergency payments are not always effective," says
Gregory Kerwick, vice president, global sales emerging payments
at JP Morgan Chase. "For the person in dire need of food, clothing
and housing, standing in line at a bank -- if it's even open --
is not a very efficient or pleasant use of their time."
An increasing trend
To help such people get out of line and on with their lives, JP
Morgan Chase and The Hartford Financial Services have launched The
Hartford Electronic Claim Card. They're not the only ones. Travelers
Insurance, in partnership with US Bank, has been using CAT cards
to pay claims since Sept. 11. And State Farm is performing
small-scale feasibility studies on a CAT card of its own. Other
insurers are sure to follow if they're not already using CAT cards
as a payment mechanism.
Depending on the size of the claim, funds loaded on a card may represent an initial payment or a full resolution of a covered loss, as determined by a claims adjuster. The Hartford, for example, limits card funding to a maximum of $5,000.
"We offer a suite of payment alternatives to
our insureds," says Vittoria Pace, assistant vice president,
property claims field operations at The Hartford. "We
offer electronic funds transfer, traditional checks and this emergency
claim card. We're trying to provide the insured with a number
of different solutions to meet their needs."
To be sure, CAT cards are not a perfect fit in everyone's
wallet. For some, the time-tested check or wire transfer makes more
sense, particularly if their banks are open for business and if
they've not been dislocated by the catastrophe.
Lots of pluses
Nevertheless, it's easy to appreciate the merits of a little plastic
card with a magnetic strip after a tornado turns your home on the
range into a little trash heap on the prairie. In fact, the cards
offer some distinct and valuable advantages over other payment media.
Most importantly, they will work whether your bank is on the same
corner as it was before the storm. And even if your bank is still
there, it would be within its rights to place a hold on any deposited
funds, irrespective of your needs.
That won't happen with a CAT card. "We can immediately
fund the card through our system, and then the insured can walk
down the street and buy food or clothing from a local merchant or
step up to an ATM and withdraw cash," Kerwick says. "It
is real-time funding. You don't have to wait until the next day
for the wire or the check to clear."
CAT cards are also less susceptible to theft or fraud
because you need a personal identification number, or PIN, to use
them. Lost or stolen checks are like cash in the hands of a street-savvy
criminal. Furthermore, if your PIN is compromised, you still have
the protection of the Electronic Funds Transfer Act, which limits
your liability to as little as $50. "Of course, the insured
needs to promptly notify us of the loss or theft (of a CAT card),"
Pace says. "Then we will contact JP Morgan Chase, close the
account and reissue whatever monies are appropriate."
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| Emergency claim cards provide ready cash |
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| CAT cards are loaded with insurance money and can be used for necessities after a disaster. |
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