MR. MARC FISHERFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your community with the world. I'm Marc Fisher sitting in for Kojo. Coming up this hour, with damages of at least $20 billion, Superstorm Sandy is quickly adding up to one of the most expensive storms in U.S. history. So who's footing the bill? If you've ever filed an insurance claim, you know that the answer can be complicated. You know that when a tree, for example, falls on your house from your neighbor's yard, well, maybe you don't know what happens in that case.

MR. MARC FISHERThe flood in your basement, who's responsible? Who pays? And is your fear justified that ultimately you, the consumer, will foot the bill? For many homeowners and businesses, it might be the first time they've really looked into what's covered and what's not on their policy, which can be a tedious and anxiety-producing work to consider riders, deductibles and all those impenetrable clauses. But experts say the time to make sure you know what's covered is before the next big storm. And here to help us through that thicket are Billy Simons.

MR. MARC FISHERHe's the owner of Rust Insurance Agency, which has been around in the District for more 100 years. Robert Hunter is director of insurance for the Consumer Federation of America, a consumer advocacy organization. And on the phone from New York City, Robert Hartwig is an economist and president of the Insurance Information Institute which provides information and analysis about the insurance industry. If you'd like to join our conversation, you can call us at 1-800-433-8850.

MR. MARC FISHEROr email us at kojo@wamu.org and tell us about your experience with insurance in these kinds of natural disasters or other homeowner situations. What has been your experience with insurance companies? Have the things that you thought would be covered been covered, and if not, what has happened? How do you think we should deal with the cost of future storms and flooding? Let's start with Bob Hunter. What's the breakdown? What is going to happen with this disaster that struck much of the East Coast? How much of that will be paid for by insurance companies?

MR. BOB HUNTERMy current estimate is somewhere around 20 -- well, insurance companies will pay about $12 billion, maybe $15 billion, in that range.

FISHEROut of 20?

HUNTERNo, no, out of maybe 50 total. But I'm talking insured losses by the private insurer, which is basically wind. And then the flood insurance program will also pay probably another $10 billion.

FISHERAnd is that pretty standard par for the course that, what, about 20 percent gets covered by private insurance?

HUNTERIt's -- well, it's closer to -- well, private insurers, about 20 percent, 25 percent perhaps, sometimes higher, depends on the storm and the nature of the storm and how widespread it is and how much insurance there is. For example, flood insurance in New Orleans at Katrina, there was about 60 percent of the people had flood insurance. In this case, there'll be a lot less, maybe 25 or 30.

FISHERAnd so the vast majority of the cost gets covered by who, the taxpayer?

HUNTERThe policyholders or the taxpayers or the human beings, you know, so if you have a house and you file claims, you'll -- the insurance companies will most likely pay for those claims. But you'll have deductibles, you'll have payments, you'll have other things that may not be covered. There are all kinds of little exceptions in the policy. There are limits in the policy and so on. So you'll pay that, and the -- and, of course, the federal government may come in with disaster relief. In fact, they will in many places. But disaster relief is not like insurance. You'll probably have a loan or something you'll have to repay.

FISHERAnd, Bob Hartwig, in New York, you are actually in the midst of the cleanup there, the post-storm cleanup. And, in fact, your offices are in Lower Manhattan where much of the flood damage has occurred. So tell us what it looks like outside your building. And where do these estimates of $20 billion come from? Is that -- are -- you know, how real are those numbers?

MR. ROBERT HARTWIGWell, let me just begin with your first question. What does it look like out here? Well, if you're around the periphery of Manhattan, those areas along the water, there's a lot of flooding damage. And many of the office buildings and the commercial structures, the retailing outlets are all closed, the restaurants, they've all had flooding. And then in their basements, all the mechanical and safety systems, anything from furnaces to elevator systems to the electronics in the building, a lot of those have been damaged by the flooding.

MR. ROBERT HARTWIGSo it's going to be weeks in some cases and maybe months for some to get back on their feet. So I just, an hour, was on at the South Street Seaport in New York where many people are familiar with that, very, very popular with tourists. And every single -- many of the businesses and restaurants are boarded up there. All of them are closed. And they're working on gutting most of those structures. Now, and -- but in terms of the cost, right now, it's very early day. So, as Mr. Hunter mentioned, he mentioned perhaps 12 to $15 billion for private insurers.

MR. ROBERT HARTWIGThe estimates are basically in a 10 to $20 billion range. These are still basically computer-generated estimates at this point. It'll be a few weeks before we get estimates that are basically drawn from the numbers that are coming in from the adjusters on the ground, and because this is still actually an on-going disaster in some sense. As I mentioned, you know, some buildings are still being pumped out. Some still have water, and there's going to be a lot of business interruption losses associated with this.

MR. ROBERT HARTWIGWe don't really know ultimately where the costs will wind up. If we wind up at the high end of the range at $20 billion, Sandy will become the third most expensive hurricane in terms of insured losses in the United States' history. And if it's closer to $10 billion, it'll be somewhere around the sixth most expensive.

FISHERSo there are really two numbers we're talking about here. The $20 billion is the actual damage. And then there's another $30 billion on top of that that's the losses that businesses have suffered -- lost business essentially.

HARTWIGWell, it's basically the uninsured -- there are total economic losses, and a certain share of that will be insured, maybe perhaps up to 20 by private insurers, $20 billion. As Mr. Hunter mentioned, maybe as much as $10 billion more through the National Flood Insurance Program, and then there are other losses that are simply uninsured, whether it's through deductibles or whether it's property for which no flood coverage was taken out or other property for whatever reason simply wasn't insured.

HARTWIGAnd then there's also a lot of infrastructure damage here in New York. We heard Gov. Cuomo just make a request to the federal government for $30 billion, a lion's share of which will go to cover such costs as damage to the subway systems and other such things.

FISHERAnd, Bob Hunter, when you say that the insurance industry will cover that 20 percent or 25 percent and the rest is -- a certain amount of the rest is simply going to have to be eaten by those who've lost property, how do people come back from that? Does insurance play a role in that? Do people buy more insurance for the next time? What -- are there lessons going forward?

HUNTERYeah. Well, I think, you know, fortunately, in an odd way, maybe Sandy -- I mean, last year, Irene happening may have encouraged people to buy insurance, and a lot of the same areas may have gotten hit. And so you may have a higher percentage of, say, flood insurance than you might have had otherwise.

HUNTERBut, yeah, what's happening -- if you have 50 billion total losses and, say, 15 is covered by private insurers and 10 by the federal flood program, then you have $25 billion at the -- that are -- that's left over, that's going to be paid for by -- out of pockets of people or by disaster relief. And so the taxpayers will also have a role in paying especially on things like infrastructure, like Bob Hartwig just said.

FISHERBilly Simons, owner of Rust Insurance Agency here in the District, what should people have done to be prepared for this storm? Had this storm hit Washington as hard as it hit New York, what would the average homeowner -- what should they have had?

MR. BILLY SIMONSWell, hindsight is 20-20, of course. And people always say after the power goes out during a winter storm or something, geez, it would have been great if I went out and bought a generator for this next storm. What people should have done and should be doing now, certainly once they've cleared up their claim activity, if they've got any, is going back to their insurance agent and double-checking with a fine-toothed comb the ins and outs of their policy to make sure that they're adequately covered.

MR. BILLY SIMONSI think people overestimate the fact that once they've set up an insurance policy because the bank made you do it when you closed on your house that you're done. That is absolutely not the case. You've got to get in there. You've got to make changes to the limits on your policy every single year. You need to increase them every single year.

MR. BILLY SIMONSAnd after a storm like this, and certainly after Katrina down in New Orleans, I was telling my insureds, look, increase your building limit, you know, between 5 and 10 percent every year to keep up with building cost because that's going to go up as a direct result of that storm. So people really need to pay attention to those numbers and the exclusions that are on their policy and what the buyback options are.

FISHERBut once the storm hits -- and, you know, we didn't get the brunt of it here in the Washington area, but many people here did have some damage to their homes, maybe, you know, discovered some leaks that they hadn't known existed, that sort of thing. Talk about the reality of what's involved in filing a claim. In other words, if you file a claim and you have not had catastrophic damage, is that a smart thing to do? Or you're going to get penalized by your insurance company or potentially even dropped if you start filing smaller claims?

SIMONSYou could. Two things kill you when you renew your insurance policies: frequency and severity. So five or 10 small claims throughout the year, insurance companies don't like that. A big catastrophic loss during the year, they also don't like that. But they'll pay it, obviously. People need to consider, first and foremost, their deductible.

SIMONSYou've got to know what your deductible is, and you've got to know that the damage that's been inflicted on your home or your car or your property falls above that deductible. Now, if it falls just above the deductible, you need to do the smart thing and not necessarily put a claim in for $700 when you have a $500 deductible because you need to save that insurance for the big losses.

FISHERSo, Bob Hartwig from the Insurance Information Institute, do you think that most consumers know this about their insurance, that it's really something to be saved for the big one and not really something to be used on a regular, daily basis the way you would use health insurance?

HARTWIGWell, first of all, if people need the coverage under their insurance policy, by all means, they should file a claim. But in the instances where your actual loss is a few dollars above your deductible, that's something worth considering, OK? And I can't speak for how any individual insurer would assess an individual claim, large or small. That's something that you'll need to discuss with your individual agent or individual insurance company. But, yes, certainly insurers do look at the frequency of claims and the costs associated with those claims.

HARTWIGAfter all, that's how they determine the price of insurance. Insurers do obviously build in the expectations that claims will occur, and they do. And every year, insurers pay millions of homeowners' claims all across the United States. And they'll pay hundreds of thousands of claims associated with Hurricane Sandy, as they did with Hurricane Irene just last year or, in your area, Marc, the derecho that came across through the Midwest and into the Mid-Atlantic states and caused those enormous power outages, brought a lot of trees down and so forth.

HARTWIGPeople are not having their policies canceled exclusively because of these events because these events happen everywhere all over the United States every day. That's the business that we're in. But when you look at the claim experience of an individual property owner over time, that's what insurers are going to be taking a look at.

FISHERBob Hunter from the Consumer Federation of America, I learned this lesson the hard way with my car insurance when, after 22 years with the company, having never filed a claim, I filed two small claims in the space of a year and was dropped. And so I learned you don't use the insurance policy unless something hugely disastrous happens. Was that the right lesson to draw, and is that a fair approach on the part of the insurance industry?

HUNTERIt's my experience that insurance companies look at frequency very carefully. Size is actually less important in making a decision to not renew a policy because -- and to not renew for a great big storm like this that's really sort of an act of God is -- it would be wrong, and the insurance commissioner should not allow that. That's not appropriate.

HUNTERBut yeah, it's something to consider, particularly in auto insurance where they do jack up your rate or tend to drop you. By the way, they tend to drop you cyclically, depending on where they are on their economic cycle. Right now, they're making quite a bit of money, so you probably have less likelihood of being dropped.

FISHERWe will continue our conversation about insurance and talk about what it does take to file a claim and what you ought to be filing for as well as looking at who is responsible for damages that are felt by those who choose to love along the coasts of the country in more vulnerable areas. You can join our conversation at 1-800-433-8850, and we'll continue after a short break. Stay tuned.

FISHERWelcome back. I'm Marc Fisher of The Washington Post, sitting in for Kojo Nnamdi, and we are talking about Hurricane Sandy, its impact and the insurance ramifications of that storm. You can join our conversation at 1-800-433-8850, or email us at kojo@wamu.org. You can also send a tweet to @kojoshow. And, Bob Hartwig, from the Insurance Information Institute, what is the story on flood insurance?

FISHERHow much are people who don't necessarily live right on the ocean covered by regular homeowners insurance for a storm like the couple we've seen in the last couple of years and to what extent do people need special flood insurance?

HARTWIGRight. Well, again, if you live along the coast, if you can see the water, whether it's the ocean, a lake, a river, you should probably have flood coverage. You're probably are already in a flood zone. But even if you're not, out of an abundance of caution, you should buy flood coverage. Even if your mortgage is paid off, you should buy the flood coverage, meaning you're not compelled to buy it by your bank.

HARTWIGWhen it comes to damages from an event like this, we have two principal types of damage. We have wind damage, and that sort of thing is covered by your standard homeowner's insurance. You know, your roof blows off, a tree falls on your house, even the water that enters through rainfall in that hole created by the tree, that's all going to be covered by your standard homeowners insurance policy.

HARTWIGAnd in an event like this, we have a mixture of both wind and water type of damage. And so the general rule is if the water comes from below, it's flood. And here we had a tremendous flooding associated with storm surge mostly, coming off the ocean. And whereas last year in Hurricane Irene, we had tremendous rainfall and a lot of river floods impacting interior parts of the Northeast.

HARTWIGBut either way, this is flood damage, and it is excluded under virtually all standard homeowner's insurance policies. It always has been. And for more than 40 years, the National Flood Insurance Program -- and Mr. Hunter is a former administrator of the program, and he'll be able to talk to you about that -- it's very important coverage. It's absolutely indispensable for coastal dwellers.

HARTWIGAnd tragically, as we -- and as we heard Mr. Hunter say earlier on, even in New Orleans after Katrina, which is basically below sea level, maybe only 60 to 80 percent of people in New Orleans proper had coverage. Immediately outside, it was below that. And then we found in the coastal areas of Mississippi which had, at least several occasions in the past, been destroyed by storm surges from other hurricanes, many people did not have the flood coverage even though it is provided at a subsidized rate by the federal government.

HARTWIGIt's not as comprehensive as a standard homeowner's insurance policy, but it is definitely going to get you back on your feet if your home is, you know, substantially damaged by a flooding event.

FISHERBob Hunter from the Consumer Federation of America, you were head of the National Flood Insurance Program and then formerly insurance commissioner in Texas. Do you think that people who live in coastal areas have a good sense of what they -- what kind of protection they need, and is the -- is it right for the larger population to be subsiding those who live along the coast?

HUNTERWell, the way the flood program was supposed to work was new policies after the flood maps were first issued about 40 years ago were supposed to be fully -- charged fully actuarial rates. Yeah, the way the program has been administered by FEMA has not done that. And there's a lot of hidden and not-so-hidden subsidies that exist. And I think there's a big debate in Congress about trying to fix that, taking some baby steps. But they're nowhere near there yet.

HUNTERBut the flood program is very important. There is a very important consideration and concern I have that happened after Katrina that could happen here. And that is insurance companies have a provision in their policy called the anti-concurrent causation clause. This is a mouthful.

FISHERSay that three times fast.

HUNTERYeah, but that means, the way that clause is interpreted by the insurance companies, and some courts agree with them and some courts didn't, is that if you have two events that happen about the same time and one is insured and the other isn't, you don't get coverage for either. So in this example and in Katrina, people got flooded, didn't have flood insurance. They got wind damage, too, and they got nothing because of the anti-concurrent causation clause. That will be a serious problem if that starts through raise its head in the Sandy wake.

FISHERAnd, Billy Simons from the Rust Insurance Agency, many people think, well, we're not right on the ocean coast here in the Washington area. But, in fact, we've had some historic floods. We saw certainly in the last couple of years that they're larger is of a region that can be flooded. What -- how good is the awareness in this area, and do you see people buying flood insurance?

SIMONSYou know, I don't see a lot of people in this area buying flood insurance unless they're down on lower K Street down by the Waterfront or Old Town Alexandria. Of course, in Northern Virginia or suburban D.C. and Maryland, most people let it go. Some insurance companies that write homeowner's policies like Chubb will offer that. You can get flood insurance for your house. I haven't got it. And I know that we've -- we have a lot of insureds that don't have it on their homes because they opt out of it.

SIMONSIt is something that we make them aware of that it's -- if it's a possibility to have it or if they need it. We do check flood maps in our office to make sure that these people aren't even in a low-lying area that isn't near the water. That is subject to flash flooding in that sort of thing.

FISHERAnd do you see insurance companies turning down claims because people didn't have flood insurance?

SIMONSIf it's flood damage, absolutely, yeah. It's absolutely excluded.

FISHERAnd do you see that not just right on the Waterfront but even in other neighborhoods around?

SIMONSWell, you know, a lot of things have to happen for it to be considered a flood. There's got to be a certain area of land that's affected. It can't just be seepage. Water in your basement is not a flood. Water in your basement is just seepage. Now, there are certain provisions in a homeowner's policy that you can get if you're -- some pump fails. These are things you can endorse under your current policy.

SIMONSAnd if your basement floods that way, it's covered if you've got that endorsement. But if you just get water in your basement or comes up to the floor -- there's a lot of underground waterways in Arlington in that area that water comes right up to the center of the floor -- it's not covered. So you just need to be proactive in getting things up off the floor and not necessarily having your will on the floor in the basement.

FISHERBob Hartwig, is there any kind of data that would tell us what portion of the public ought to have flood insurance but doesn't?

HARTWIGYeah. And just -- I wanted to mention one thing, though, with respect to the anti-concurrent causation clause. What actually happens in practice is that when there is damage associated with an event like a Hurricane Sandy or an Irene or Katrina, when there is -- that the adjusters will come and take a look at it, and they look at the individual components associated with the loss. They'll say, hey, the roof is damaged. There are shingles missing. The windows -- second-floor windows are blown in, and there's tree on the roof.

HARTWIGThis is clearly a wind-related damage. And the policy holder will be compensated by their standard homeowner's insurer for the portion of the loss that is wind. But the part that is related to flood, OK, that -- as we've already heard, that's going to be something that falls under the jurisdictions of the National Flood Insurance Program. So it's not as if there's, you know, one drop of flood water enters a property and the whole claim is somehow excluded. That's absolutely not what happens under practice with the anti-concurrent causation clause. Now, in terms of...

FISHERBilly Simons, is your experience different with that?

SIMONSWell, the ant-concurrent causation clause basically says that the insurance company, if the wording is in the policy that they don't have to pay if you have a covered loss and a non-covered loss, the non-covered loss trumps the covered loss, they don't have to. Now, some companies will look past that, some courts will look past that. But there is policy language that says we do not cover loss resulting directly or indirectly from the following, and they've got a list of exclusions.

FISHERAnd so the bottom line is to read your policy or have someone who understands that read it for you.

SIMONSHave your agent determine it, you know.

HUNTERYeah, I read that language before Katrina, and I couldn't believe it because I couldn't believe that an insurance company would build a trapdoor in the back of their policy where your coverage -- wind, which everybody thinks they have -- drops out. I'm worried about the next earthquake, whether fire after -- a fire following earthquake will be denied because of it.

HUNTERIt is not the way Bob Hartwig said it. But the way the Rust Insurance Agency people have read it, that is what it says. Now, I agree that sometimes insurance companies waive it, and in fact -- and pay clear damage. But they don't have to under the terms of the anti-concurrent causation clause.

SIMONSYou know, they don't have to do it. And sometimes insurance companies do have a heart. On Oct. 31, there was a carrier that forewent the hurricane and wind deductible, which is something you've got to deal with when you live in a wind-prone area. You've got separate deductibles. It's not your normal homeowner's deductible. You've got a very separate wind deductible.

FISHERAre there such areas in our region?

SIMONSAnything on the coast, you know, that's mostly. Up and down the East Coast, everybody's got wind deductibles, which is usually up from one to 10 percent of your property value. So it far exceeds your regular homeowner's deductible. Now, this is such a widespread -- a lot of widespread havoc that happened in this last superstorm. The insurance carrier waived that, and they said don't worry about it.

FISHERWe'll take of it.

SIMONSWe'll take care of it.

HUNTERAnd the governors of several states have said that it will not apply in this event of Sandy although the insurance trade organizations are making noise about that. And it's unclear to me whether the insurance companies will comply with what the governors have said.

FISHERSo when the...

HUNTERBut -- and there were two types of hurricane deductibles, one that mentions hurricane and one that just says wind. So even if hurricane deductibles themselves are banned by the governors' action, which I'm not sure is true, the other deductible isn't. So I still think people are going to be surprised by some very high percentage deductibles rather than a usual $500 or $1,000 deduction.

FISHERSo, Bob Hartwig, when someone has a wind or hurricane deductible on their policy and maybe is not fully aware of that and the governor then turns to the insurance company and says you guys have to cover this anyway, is the government helping the insurance company pay for that or are you guys have to eat that?

HARTWIGNo, the government is not, in any way, helping the insurance industry pay for this. And to the extent that deductibles are lower, insurers have to pick up that difference, so that all falls on the private insurance industry. Now, the hurricane deductible that we've heard discussed is very, very prominent in homeowner's insurance policies in areas that are subject to hurricane risk. They've been in place in most places along the eastern seaboard for a decade or longer, even longer in places, you know, Florida and the Gulf Coast.

HARTWIGAnd what they do is, yes, they -- basically, the deductible is a percentage of the insured value of the home rather than a fixed dollar amount, say $1,000. And what that does is it helps keep the cost of your insurance down. You know, most years, you're not going to have a hurricane claim, so you're paying less.

HARTWIGIf there were no such thing as a hurricane deductible, obviously, the average expected loss an insurer would see would be higher. And so your premium would be higher each and every year. So there's a logic behind this that helps, in some sense, extend the insurance industry's capacity to be able to provide coverage in these areas. And most of the risk in these coastal areas in the East -- in the Northeast is housed in the private sector.

FISHERLet's hear from Peter in Franconia. Peter, you're on the air.

PETERI just want to mention that we are a long ways from any water source, but because we have a storm drain in the backyard that accepts water from our two neighbors and maybe beyond, that we have chosen to have flood insurance because our basement opens up into our backyard that is only, you know, maybe six or eight inches above the storm drain. So we've chosen to have flood insurance even though we are a long ways away from a typical water source.

FISHERAnd how did you come to that decision? Is that something that an agent helped you out with? Or you just thought of it yourself?

PETERWell, we looked at the geography of the backyard, and we saw how water drains into our yard from our neighbors. And we talked to our neighbors and talked about how they'd had to put some sandbags around their back doors, and our back door is only a couple of inches higher than theirs. So we decided to do it on our own, didn't get any comments from an agent.

FISHERBob Hunter.

HUNTERYou did the right thing. If you think -- people should use common sense. You look at your property and what is the risk. But don't just use common sense. In every community, there's a map that -- and there's a repository in every community like the city hall or some place where you can find this map. And you can actually see what the 100-year storm elevation would be on your lot, and you can compare that to your first floor elevation. I would -- if you would -- within two or three feet, I would still get it because the maps are old, frequently. And I was just looking at one on the Jersey shore the other day.

HUNTERIt's 1983, the date of the map. These old maps are way too low. We found in -- after Katrina hit in Jackson County, there's 76 maps there. When they redid them after Katrina, the average map was 10 feet too low before Katrina. So people were building unwise houses. People thought they were safe. They weren't. And the map mislead them. So be a little leery of the map, especially if it's old, but look at the map and see what your risk is.

SIMONSRight. I think Bob makes a good point there, is that everywhere is in a flood zone. It just depends onto what degree.

HUNTERWell, I don't know.

PETERAnd what we were looking at...

SIMONSJust about.

PETERWe have decided that it was pennywise to buy the insurance even though the likelihood of needing it would be very, very small. The cost in comparison to the loss would've been infinitesimal. It could've had a huge cost compared to the small cost of the insurance.

HUNTERWell, you're probably in a low-risk zone so your -- the premium would be very low.

FISHERWell, we're...

PETERI'm on top of the hill.

FISHEROK. We have a link to the National Flood Insurance Program's flood map on our site, kojoshow.org, and you can take a look at it there. Let's go to Sarah in Rockville. Sarah, you're on the air. Sarah, are you there?

SARAHHello.

FISHERYes. Go ahead.

SARAHMy question is regarding automobile insurance. I was caught by one of the speed camera gotcha tickets, and my automobile insurance went up $84. And I call this, like, what, you know, I wasn't going 87 miles an hour. I was going 37 miles an hour. I was hardly a danger to society or even traffic. And I was wondering what the gentlemen thought about such a major increase for such a minor infraction.

FISHERBilly Simons, is she being punished for being a scofflaw or what?

SIMONSWell, you know, I could tell you myself, I got one speeding ticket, and my insurance company wanted to drop me. So I put the kibosh on that. But no, I think, you know, and largely, auto insurance is a loser for the insurance companies, and they write it because they need to. But they don't make a whole lot of money out of it. So they're quick to pull the trigger. You know, I'm sorry you had an $84 increase. What you could do if you're not happy with it is just wait another year. And if you're not happy with the carrier, have your agent shop the coverage for you.

HUNTERYeah, you should always shop...

SARAHI was wondering about shopping. Does that -- how does that affect your credit rating if you're seen to be shopping for automobile insurance?

HUNTERI believe there is control that -- maybe Bob Hartwig knows that one. But I believe that shopping is very important. You could easily pay a 100 percent more from one company to another, and so it's very important to shop. And there's good resources. The state insurance departments have websites with data on average payments. You can go to your company. You can go to your agent.

HUNTERThere are a lot of places where you can get information. It's -- when I was insurance commissioner in Texas, we gave people -- 25 people our buyer's guide. They brought their order policy. And another 25 brought their homeowner's policy. We gave them one hour to study the guide and make calls, and the average person saved 100 bucks. And so its $100 for an hour's work. It's worth the effort.

SIMONSYeah. And, you know, auto insurance is determined largely, too, on what kind of car you drive and how old you are. So there's a lot of components that feed into it. If you're an 18-year-old kid driving a bright red Ferrari and you have one speeding ticket, it's going to go up a lot. If you're 80 and you drive a station wagon, and you get a speeding ticket, it might go up a little. So there's a lot of...

FISHERQuickly, Bob Hartwig, is there any penalty...

HARTWIGYeah.

FISHER...involved in shopping around for...

HARTWIGOh, absolutely. We recommend that people shop for their auto insurance. And you want to make sure that you have full and complete coverage, of course, and that you're dealing with a financially very strong insurance company. You want them to be there and that they have good service, OK? You might have an accident at 3 o'clock in the morning. And you're going to make a phone call, and you're going to need somebody to be there.

HARTWIGBut to kind of segue the auto insurance discussion into the Hurricane Sandy discussion, one dimension of loss that historically accounts for about 5 percent of all losses from major hurricanes is flooding to vehicles, and thousands, maybe tens of thousands of cars, flooded in the event -- with Hurricane Sandy. In fact, I think with Katrina, we saw about 250,000 automobile-related claims, and these all add up to a couple of billion dollars, in fact.

HARTWIGSo if you have -- you know, you might ask the question, is my flooded vehicle covered? And if you have what's called comprehensive coverage on your vehicle, that will be covered by your private insurance. There's no national flood insurance program for automobiles. So long as you have that coverage -- and most people who have a loan or who lease a vehicle will keep that, although some people who have old vehicles that they own outright do drop that coverage.

HARTWIGSo I was at -- in Staten Island, doing a taping -- actually doing a live shot with a local TV station there, and we started out the shoot with a boat on top of a car. And there were a lot of flooded vehicles in there and vehicles that had trees on top of them, you name it. So that's a -- for some people, that's actually going to be their biggest loss. They may not have had a lot of damage to their home, but they may have wound up with a tree on their car or their car being parked in an underground parking garage where it may have flooded.

FISHERBob Hartwig is president of the Insurance Information Institute. And we'll continue our conversation about insurance coverage after disasters and take a look at the increasing number of storms and the insurance industry's ability to withstand and pay for all of that damage when we come back after a short break. You're listening to "The Kojo Nnamdi Show." I'm Marc Fisher, sitting in for Kojo. Back in a moment. Stay with us.

FISHERWelcome back. I'm Marc Fisher of The Washington Post, sitting in for Kojo Nnamdi. And we are talking with Billy Simons, the owner of Rust Insurance Agency here in Washington, Bob Hunter, director of insurance for the Consumer Federation of America, a consumer advocacy organization, and Bob Hartwig, who's the president of the Insurance Information Institute. We're talking about Superstorm Sandy, its impact.

FISHERAnd, Bob Hartwig, when you look at the number of storms, big storms that we've seen in the last few years, we don't want to reargue the entire climate change issue here, but are you seeing dramatically more damage and more claims, and is the industry fully prepared and able to pay for it?

HARTWIGWell, there's no question that in the United States and, in fact, on a global level, we're seeing more events, and in aggregate, it's costing more money. Last year, 2011 was the fifth most expensive year in United States history in terms of insured losses from natural disasters, and this year will not be far behind. And we can go back not too long, and we see years like Hurricane Katrina, Rita, Wilma the year before that, many others. So there are wind events. There are flood events. As I mentioned, the derecho that impacted the Mid-Atlantic states, you, earlier, big snow storms.

HARTWIGYou know, a week after the hurricane, we wound up with a nor'easter. I had nine inches of snow in my yard that day, and lots of other people had different kinds of damage. So the industry is financially prepared to handle this, and these are the types of events that we do plan for. Even if Sandy winds up, at the high end, at $20 billion in privately insured losses, that compares to $47 billion in insured losses for Hurricane Katrina a number of years ago in today's dollars. But we want to make sure that people are prepared, too.

HARTWIGAnd what we do is, for our customers, we at the Insurance Information Institute create -- have created a suite of softwares, of apps, pretty much for your iPhone. And what these apps do -- and you can find them on YouTube, or go to our website at iii.org -- sorry, on iTunes and -- or to our website at iii.org. And what you can do is you can create a home inventory absolutely for free. You store all your information basically on the cloud with this.

HARTWIGWe have other ones that help you plan ahead of time for disaster evacuation plans, those sorts of things, all available to our policyholders to make sure that they can reduce their losses, given that these sorts of events are more frequent, and when they do occur, reduce the costs and, hopefully, if they do occur, expedite the claims process because you'll have all that information that you need to present to the adjuster when the adjuster arrives.

FISHERAnd, Bob Hunter, are you seeing a difference in the way companies react now that there are more frequent and more damaging storms? Are they less likely to just pay up, or are they fighting more?

HUNTERThey've mastered hurricanes, the insurance industry, after Andrew. Andrew was a shock to the industry, and they really got hit there. The percentage of claims to losses nationally in homeowners that year jumped 50 points, you know, from -- their loss ratio was 70 percent of the -- 70 percent of the premium was paid out in claims, and that next year of Andrew was 120. They reacted...

FISHERThat's not a good business model.

HUNTERNo, no. It was -- and they were right, and even consumer groups supported changes. They adopted models for setting rates, which very significantly raised rates along the coast. They came up with all these new loopholes in the coverage. We've been talking about some of them. There's a lot more. They dropped people into state pools.

HUNTERThey created various wind and other pools along the coasts, and they dropped a lot of the -- a lot of people over the years. And so when Katrina hit, which was twice as big a storm as Andrew, their loss ratio only jumped five points. So they've really mastered hurricanes, and so I think they will be fine. They don't ever cover flood. They've now capped their various losses, and they'll be fine. They're having a very good year.

HARTWIGYou know, Marc, I would kind of challenge that idea that the reason why insurers are doing OK is because of so-called loopholes. It is true that the cost of insurance in coastal areas really since Hurricane Andrew 20 years ago has risen substantially, and that is purely because of the risk. I mean, look at it. Right here in about a span of about 14 months, in the Northeast alone, we may have seen between Hurricane Irene and Hurricane Sandy close to $25 billion in privately insured losses. That's an awful lot of money.

HARTWIGAnd in the Northeast, basically all of this is in the private sector. There's relatively small amount of this risk in government-run programs, including in places like New York and New Jersey. So, you know, and for insurers to be able to continue to participate in this market, they need to be able to charge their premium that reflects the risks.

HARTWIGAnd it's exactly at times like this when people can be confident that their insurer is financially strong, going to be there to pay the claim and unlike, say, the problem with banks a few years ago during he financial crisis. And one of the reasons why the insurers are best -- or even better prepared than they were, say, 20 years ago is they used a lot of what's known as reinsurance, which is insurance for insurance companies.

HARTWIGSo that means your insurance company actually buy the policy with another insurance company that does business around your -- around the globe. So the losses from an event like Sandy, part of them wind up being borne by companies in Germany or the U.K. or Bermuda or France or what have you, spread around the world. And that's how it should work. And...

FISHEROK...

HARTWIGAnd other insurers tap into capital markets.

FISHERBilly Simons, so when it comes down to the consumer looking around for a homeowners policy, is it -- it's a simple question of the more you pay, the more confident you can be that they're going to pay a claim, or are there differences in companies that go beyond price?

SIMONSWell, you need to check. You need to check who your -- what your carrier's A.M. Best rating is. You need to make sure that your insurance agent is placing it with a company that isn't a fly-by-night insurance company. One thing that Florida did after Andrew is they had just a few companies that had the market -- the lion's share of the exposure down there. So once Hurricane Andrew came through -- and, of course, you know, 20 miles north on Hurricane Andrew would have wiped out State Farm.

SIMONSThey would've gone bankrupt. So they started to do a underwriting association, which was what they kept -- they're able to keep premiums lower. People like low premiums. But, of course, they don't have the money to deal with another catastrophic loss. You have to be able to charge a responsible amount of premium to build up the capital to respond to things like this.

FISHERBut are there also differences just in corporate approach, corporate culture that determine how willing they're going to be to pay up?

HUNTERYeah. You can get a very good company for a very low price. You can get a company like, in New Jersey, the New Jersey Manufacturers or Amica Mutual or USAA if you qualify. Those companies always have great results. And their corporate culture is such that they really come out and help you. When I was commissioner in Texas, I went to USAA, and I found out they basically have the golden rule. People that get hurt, they want to treat them the way they would want to be treated if they didn't know anything about insurance. And that is right in their training manual.

HUNTERWhereas other companies have much -- for every complaint that USAA and New Jersey Manufacturers and Amica gets, State Farm gets about three times that many, Allstate gets five times that many, Travelers gets almost 10 times that many. So there are definitely corporate cultures in there. You can pay more and get good coverage like Chubb, or you can pay more and get bad coverage. You can also pay among the least cost rates and get excellent coverage.

FISHERWell, let's go to Marie in Baltimore. Marie, it's your turn.

MARIEGood afternoon, gentlemen. I think you all talked about wind deductibles. Am I correct on that?

FISHERYes. Yeah.

MARIEOK. What about tornadoes? Are they deductible to cost? A tornado hit in Maryland last year, I believe, and damaged roofs on the apartment complex.

FISHERRight.

MARIEAnd so tornadoes are a little differently than other wind tragedies.

FISHERBilly Simons.

SIMONSRight. You know, again, if you don't live in an area that's like Tornado Alley, you're not typically going to have any exclusions on tornadoes. Tornado is wind. So if you live in an area and a random tornado drops down, chances are it's going to be covered. Now, if you live in a wind-prone area and you have a wind deductible or you have a named storm exclusion or inclusion, you know, these are things you're going to have to check with your insurance agent on to make sure that you've got the appropriate coverage.

SIMONSI mean, you know, one thing I just want to put out there is that, again, I can't stress enough that people need to keep their agent up to par on their living situation. The guy Peter that called before with -- living up on the hill but he lives by a storm grain, that's something you might want to mention to this nice lady on the phone.

SIMONSIf you live an area where you've -- you see how twisters coming down towards your house, you may want to just let you insurance company or your agent know that so that you can be certain that you don't have anything in your policy that's going to take coverage away if you get hit.

FISHERBut here's Bob in Annapolis. It's your turn.

BOBYes. I lived in Texas for seven years. And at that time, flood insurance was not available except through companies that worked for the federal government who sustained the loss. And in that case, you couldn't buy complete homeowners -- I think you're (unintelligible) You couldn't find -- I obviously was interrupted here. I'm sorry. You couldn't buy full coverage. The government provided three levels -- high, medium, low -- which did not take into consideration or not completely the value of the house. Also, on the...

FISHEROK. Let's get an answer for that. Bob Hunter.

HUNTERYeah. Well, flood insurance is limited. It only covers up to $250,000 on your house, for example, so it -- but it's available. If you live in a participating community -- and most communities that are flood-prone do participate -- then you can get flood insurance on your house even if you're not in a floodplain.

FISHERWe have an email from Carol saying that more and more even with a quality carrier have -- are finding that the insurance agent won't say much about anything. She submits everything to the carrier. "I'm fast losing trust in her commitment to me as a 15-year customer." And so she's just particularly curious about the expense of flood insurance, lives near Sligo Creak, not in a high risk area. The cost was very expensive. And only 20 percent of the loss would be covered. Does she need flood insurance? Is that a good deal for her? Billy.

SIMONSWell, it's more a comfort level with her agent. She needs to be able to trust her agent. So if she can't trust her agent, she needs to look for another agent. You know, as an agency under myself, I take the same approach that a lot of the good insurance carriers do that I would treat someone the way I would want to be treated.

SIMONSSo we really take it upon ourselves to be viewed like you'd view your lawyer or your accountant. You need to be able to put your trust in your insurance agent so that they can help guide you through the maze that is insurance and understand the tricky policy language and understand when you do or don't need flood insurance and at what cost.

FISHERBob Hartwig, we just have a minute left, but could you talk about who is really going to pay for the damage from Hurricane Sandy? In other words, is it going to be -- aside from what the insurance companies payout, when it comes to taxpayers and ratepayers down the road, is it mainly the people in that region, or does the whole country end up footing the bill?

HARTWIGWell, it's really a mixture. If we have a total of $50 billion in economic losses from this event -- and we've heard maybe between private insurers and the National Flood Insurance Program maybe about 40 or 50 percent of that is paid through those two sources alone -- you know, those losses, private insurers, while there are resources that may be used to pay these claims comes from wherever, ultimately the losses, the premiums are based on the types of losses we experience in that area.

HARTWIGThe flood program draws subsidies from around the country, then, of course, any government aid that comes in that's really coming out of the general government coffers. So that means people around the country or taxpayers, in other words, are going to wind up paying for some of the recovery and disaster aid associated with this event.

FISHERBob Hunter, will premiums overall go up as a result of the storm?

HUNTERRates for the private sector and for wind damage like in a storm like was set by a model, and you have to ask the modelers if they've learned anything new. It shouldn't have a big impact because I happen to know that there's models of much bigger events hitting New York, for example. And so it's probably already contained in the model except for maybe some little lessons that they can pick up from the storm.

FISHERBob Hunter is director of Insurance for the Consumer Federation of America, a consumer advocacy organization. He formally ran the National Flood Insurance Program. On the phone from New York, we're joined by Bob Hartwig. He is an economist and president of the Insurance Information Institute, which provides information about the insurance industry. And Billy Simons is the owner of Rust Insurance Agency here in the District in downtown Washington since 1889. I'm Marc Fisher, sitting in on "The Kojo Nnamdi Show." Thanks so much for listening.