Experts say widespread rate increases
The Sept. 11 terrorist attacks
on the World Trade Center and the Pentagon are expected to bring
the highest insurance claims in U.S. history.
However, it is not expected to have an immediate impact
on individual rates, except perhaps for property insurance.
Estimates of claims for life, property, injuries,
workers compensation and business interruption range from $15 to
"Clearly, we can't put a specific number
on it yet," says P.J. Crowley, vice president of the Insurance
As the death toll continues to climb, the U.S. life
insurance industry, which has $3.1 trillion in assets and liquid
reserves, says it is ready to pay claims to families of attack victims.
"We process more than 10,000 benefit claims
on a daily basis. We prepare for the unexpected. That's our job,"
says Jack Dolan, a spokesman for The American Council of Life Insurers.
"Although Tuesday's events were a shock, we are prepared for
In 2000, the life insurance industry paid a total
of $44.1 billion dollars in death benefits on 3.8 million life insurance
policies. Industry experts expect the Sept. 11 tragedy to have little
impact on future life insurance costs.
Property and casualty insurers are bracing for an
onslaught of claims as well. Numerous insurers will be affected
by the attacks.
But because a large number of companies insured attack
victims, the financial costs of the terrorist attacks will be spread
among many insurers, reducing the impact on any single company.
"No one company is going to bear the brunt
of the burden," Crowley says.
Hurricane Andrew hit the eastern seaboard in 1992
and resulted in $15 billion in losses. Some smaller insurance companies
struggled to pay claims made by policyholders in the storm's aftermath.
"There were some insurance companies that
went bankrupt because their risk was concentrated in a specific
line in a specific location," Crowley says. "And when
the hurricane hit they were unable to cope."
Since then, insurance companies have been careful
to spread risk across several product lines so as not to be devastated
by a single catastrophe, even one as large as the World Trade Center
"There's no doubt the insurance companies can
stand it," says Robert Hunter, director for insurance for Consumer
Federation of America.
While autos and nearby residences were damaged by
the plane attacks and the subsequent collapse of the World Trade
Center, the greatest losses will be felt in the commercial insurance
Following Hurricane Andrew, property owners across
the state of Florida saw their insurance costs skyrocket. Business
owners, especially those in New York City and New York, will likely
see a rise in property insurance costs.
"You might see primary rates go up for commercial
accounts, particularly worker's compensation and business interruptions
insurance," Hunter says.
"The biggest impact will be in New York, but
clearly it will spread beyond that."
Businesses seen as targets for terrorism, such as
Disney World or the Sears Tower in Chicago, may have to pay more
for insurance as well.
"Any time you have a historic and tragic event
like this, there will be lessons learned both in the business community
and the insurance community," Crowley says.
Individual insurance policies are less likely to be
impacted. Just how much business insurance costs will increase is
tough to say.
"It's too early to tell until we understand
the full dimension of what's involved here," Crowley says.
"Other than to say, this is why we have insurance."
-- Posted: Sept. 18, 2001