After a series of tornadoes, floods, high winds, and hail throughout the midwest, US property insurers, led by State Farm, Allstate, and CNA, have decided to unilaterally rewrite all property coverage in this country.
As of July 1, 2013, no property insurance policy will cover wind, hail, rain, tornado, or flood damage. Losses from 2012-2013 storms have eaten into the profits of US insurers, lowering their risk ratio to a point there top executives might have seen a decrease in their yearly bonuses.
These changes have been approved by other financial institutions, namely mortgage companies who called the proposed changes rational and expected. "No industry can expect to pay out money simply because a little wind caused some damage. We applaud the insurance industry's foresight in taking this progressive, pro-consumer move."
Insurance policies traditionally covered all risks. This changed in flood prone areas, when insurers wrote out such coverages, and demanded that home owners and businesses buy additional flood insurance. In higher risk areas, such as Louisiana, Florida and Alabama, water coming in from blown off roofs was also defined as "flood" damage.
This latest move is simply taking that same concept and applying it nationally. "Why should poor, over-worked, struggling insurance giants suffer, simply because God-based storms decided to land in a populated area? Smart people should know that they should move," said one insurance executive.
The banking industry's support of this change surprised people at first, until they reviewed what happened during the recent real estate bubble. Simply put, banks sold mortgages to people who had no business buying property. Unemployed, under-employed, and people with bad health suddenly found purportedly free money and large houses available. When reality began to set in, balloon interests rose, and this new class of homeowners found themselves unable to pay the price of home ownership. Mortgages were suddenly under water, people were unable to pay their bills, and even minor health problems caused huge bills, forcing people out of their homes. All across the country, property values declined, even collapsed, and the damage to consumers and the average joe were compounded.
Who won? The Banks. After selling mortgages to people who could not handle the debt, the banks ended up taking over the property. They wrote off losses, they received massive doses of federal moneys, AND they ended up owning hundreds of thousands of new properties, at values that were 30-40% below the value they had in 2007. (SEE BELOW)
Now that property values are exploding, guess what the banks are doing? selling the very same properties they stole from those folks they ripped off earlier. At HUGE profits. So why support the insurance industry now?
Because banks know that storms are becoming far more numerous and far more severe. They know that property damage is on the increase. But they also know that their real estate bubble was a one time deal. They know that the feds would never let them get away with those scams again, even if a gullible public might. But, what if they found another way to steal property from their "clients?" Since the 1950s, every mortgage company requires property insurance in order to get a loan. Now, if the poor homeowner loses a roof, gets flooded out, or suffers massive hail damage, and the insurer claims Act of God as a defense to any payment, the folks cannot repair or replace their damage, and they end up walking away. Which means the Banks take it over again.
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(* unfortunately, the first version of this article ignored the countless times that Bankers committed fraud, faking signatures, lying about notice to property owners, and foreclosing on properties on which they held no interest. The Property insurers looked at that rampant, non-stop fraud with envy and greed. )