What you don’t
know about
disaster…
could hurt you….
Prof Marty Steffens, University of Missouri
STAGES OF DISASTER
PREPAREDNESS
DISASTER
RESPONSE
RECOVERY
REMEDIATION
Most disasters happen in
seconds
 Everyone covers quick onset disasters, like floods, tornadoes,
hurricanes and earthquakes.
 But reporters ignore the economic impact of “slow onset”
disasters, such as heat and cold spells, winter storms,
droughts, widespread crop disease or flood cycles.
 In the NOAA list of billion-dollar weather-related disasters, the
1988 drought and heat spell caused damages of $66 billion
in the Midwest. To access the list:
www.ncdc.noaa.gov/oa/reports/billionz.html
Biggest loss is property
 The biggest damage often is not flattened homes and buildings.
It’s the loss of commerce when cash registers are silent and cash
flow pulls the business down the drain.
 It’s business interruption caused by floods, ice storms or even
closed roads that catches business owners unaware. During the
Sept. 11 disaster, the cost of lost business surpassed building
damage. United Airlines claimed a $1.2 billion loss, not from its two
lost aircraft, but from loss of business for the three-day stoppage of
air travel.
 Other communities, like Chicago and Clark County-LasVegas, also
filed suit against their insurance companies for not covering
massive losses incurred by their municipal airports during the
stoppage. The loss of landing fees and concession were part of
the billions lost by the travel industry in late 2001 and 2002.
NYTimes series
on SANDY and businesses
Today’s disasters are worse
due to higher property values
 Somewhat true. If 1906 earthquake that flattened (and burned)
much of San Francisco were to happen today, the damage to the
now-larger city would exceed $120 million. However, improved
building codes have reduced damages in many earthquake-prone
communities.
 For example, Seattle suffered a 6.8 magnitude quake in February
2001, with damages about $2 billion, far less than the $40 billion in
damages and 51 deaths caused by 6.7-magnitude Northridge
earthquake in Los Angeles in 1994. Seismologists say Seattle was
spared because its quake was deeper than the deadly shallow one
that usually strikes California fault lines. “Without the improved
seismological science and improved building codes, I think the
situation would have been much more deadly," said Butch Kinerney,
spokesman for the U.S. Geological Survey.
 Most buildings constructed in Seattle over the past 25 years or so
were built to a uniform code designed to withstand strong
earthquakes.
Disasters are well, obvious
 Sometimes not. Geomagnetic solar storms cause massive
outages of electricity. According to NOAA, solar disruptions can
also wreak havoc on communication and disrupt air and space
transportation, in total costing industry billions a year in losses.
 Traffic accidents, certainly not seen as disasters, are as a group a
disastrous situation in the U.S. The year 2005 saw an increased
number of deaths; some 43,220 persons were killed in traffic
accidents – far more that the total killed by Katrina and other
natural disasters in that same year. Nearly 1 in 6 traffic deaths
were directly attributable to weather conditions. For more
studies, contact the American Automobile Assn.
Disasters don’t discriminate
 While it’s true that Mother Nature doesn’t discriminate, the ability
to recover from disaster depends on two factors: Insurance and
income.
 Tornadoes and other disasters can have a strong economic
impact according to gender, race, and income, according to
studies by the University of South Carolina.
 The first to lose their jobs after a disaster are hourly service workers.
Also, women living alone are also more likely to move rather than
rebuild, as are non-English speaking populations.
 Renters don’t return, and absentee landlords are more likely not
to rebuild. Contact: the has done research on poverty and
vulnerability; they can also talk about agriculture damage.
Who gets hurt the most?
Unskilled laborers
with little savings.
People who didn’t
have the means to
get out.
People at the
bottom of the
income bracket.
Disasters are bad economic
news
 Not always. While casualties linger in a community’s memory, disaster often has a silver
lining. In 2002 residents of St. Joseph, Mo., suffered extensive roof and auto damage
because of a massive ice storm that hit Kansas City and the surrounding area. But
editors at the St. Joseph News-Press noticed something in the weeks following the
storm.
 They were witnessing the so-called “hot-tub” effect. When insurance money rolled in to
replace roofs, homeowners took the opportunity to upgrade their property – adding
accouterments such as backyard spas or a deck. (Personal interview,
2004)Communities that have suffered flood damage, such as St. Louis in 1996, have
used the damaged area to rethink and redesign downtown areas. Jonathan Selden,
a reporter for the Austin Business Journal used city records to find local businesses that
benefited to the tune of $2.5 million from relocated hurricane Katrina victims. He found
a local carpet-cleaning firm that beat out national firms for emergency cleanup duties;
but he also found a Texas company that was paid $15,430 to provide underwear to
evacuees. (Issue of Oct. 28-Nov 3, Austin Business Journal)
Short-term Impact
 Complete dispersion of the population to other
regions from the hardest hit parishes.
 Recovery Expenses actually give a windfall profit
to surrounding areas as reporters, non-profit aide
workers and insurance claim money surges into
the area while residents compete for space.
Short -term Impact
 Residents scattered
throughout
surrounding parishes
that were not as
damaged
 People scattered
farther than just out of
their parishes
 The question remains
will they return?
Who gets hurt the most
Ex: St. Bernard Parish - hardest hit areas
 Decrease in the number of available Jobs for
permanent residents
 Decrease in pay for those Jobs available
 Increased dividend and interest income for the
area as a percentage of Income
Did Katrina cause an overall
US economic slowdown?
 Housing starts continued to increase in the US
and building prices increased as materials were
diverted to the devastated areas
 However, largely the US economy continued its
growth after Katrina and the effect of the Storm
did not cause a downturn
Comparison Study: Hurricane
Andrew
Hardest hit area:
Homestead, FL
Surrounding areas that
benefited: Miami, Ft.
Lauderdale
People hardest hit:
unskilled laborers,
migrant farmers
Did the economy of
Homestead ever
recover?
Homestead, FL 2007
 Census Figures fell between 1990 and
2000
 Most of the original population never
returned by 2000
 The surrounding economies felt a
recovery boom after Hurricane Andrew
 Since 2000 the population has begun to
grow as Miami crowds people back into
Homestead.
Do we become more
resilient after disasters
occur?
 Building codes become more strict after
disasters occur
 Insurers reassess their losses due to large
disasters like Katrina and premiums rise
accordingly
 Underwriting becomes stricter and more
accurate in times immediately following
disasters
Useful databases
 NOAA
 University of South Carolina Hazards Research
Lab, (803) 777-1699. The Hazard Research Lab
http://www.cla.sc.edu/geog/hrl
 Census Bureau’s OnTheMap Emergency
 GeoPlatform.gov
Longterm Economic Impact
on St. Bernard Parish
 Most of the unskilled labor population won’t
return
 The area’s economy will disperse and assimilate
to surrounding areas
 As space runs out in New Orleans St. Bernard may
be rebuilt after more than a decade.
Interesting facts
 9 of 10 Americans live where there is a moderate
to high risk of deadline disasters – wildfires,
hurricanes, floods, tornadoes, volcanoes,
earthquakes, wind damage and terrorism.
 Continued migration to coastal and Southern
cities
Do we become more
Resilient after disasters
occur?
 Hurricane risk in the areas remains the same
 People rebuild when the memory of a tragedy is
forgotten.
 Even insurance companies lower premiums once
markets calm and competition for business
resumes
Consumers and Fraud
 Price gouging
 Fraudulent contractors
 Insurance scams
 Government aid scams
 Online fraud
 Auto fraud
 Arson
Disaster fraud
 Even before the mass problems caused by the 2005
hurricane season, Susan Lundine (2006), a reporter for the
Orlando Business Journal, scoured Florida insurance
records to detail claims from the batch of hurricanes that
crisscrossed the state a year earlier in 2004. That year,
hurricanes Charley, Frances, Ivan and Jeanne crisscrossed
the state, resulting in 1.7 million insurance claims. Lundine,
shifting through records filed by insurers with the state of
Florida, found that homeowners who lived in 12 counties
on Florida’s east coast, 370 miles from where Ivan made
landfall on Sept. 13, 2004, claimed more than $65 million in
damages from that storm – even though it didn’t touch
their area. She found a homeowner in Melbourne,
Florida, who claimed damage from Frances, showing a
photo of his ruined home. In fact, the home was under
renovation – not damaged by that Category 4 storm that
hit August 13.
Check out insurance
commissions
 Like Lundine’s project, the key to reporting this
issue lies at the various state insurance
commissions, where fraud is reported. Also, the
Insurance Information Institute (www.iii.org) is a
good place for getting tips on current schemes
and enforcement. Other good sources are the
Insurance Informatlion Institute, www.iii.org, and
the non-profit National Insurance Crime Bureau,
which has a special section on disaster fraud on
its website, www.nicb.org.
Govt aid fraud
 According to a 2006 report from the New York
Times (Lipton 2006), a hotel owner in Sugar Land,
Texas, was charged with submitting $232,000 in
bills for phantom victims. More than 1,000 prison
inmates across in Gulf State also tried to collect
more than $10 million in rental and disaster-relief
assistance. An Illinois woman was charged with
trying to collect federal benefits by claiming she
watched her two daughters drown in the rising
New Orleans waters. Prosecutors say the children
did not exist. The size of the fraud brought a
comment from Sen. Susan Collins (R-Maine),
chairwoman of Homeland
Online ‘giving’ fraud
 It had its birth in the huge outpouring of aid collected in
the wake of the 2004 tsunami that devastated Southeast
Asia. Just two weeks after the disaster, as millions of
people were logging onto website to donate via credit
cards, federal agents arrested a Pittsburgh man who was
using the name of an Oregon charity to scam generous
Americans. The man, an unemployed painter, sent more
than 800,000 emails, asking for aid relief. He told agents
that he thought it was okay to keep the money if he
actually did donate some funds. For guidance, the Better
Business Bureau maintains a Wise Giving Alliance that
voluntarily grades 500 charities on their governance,
giving, spending and how much information about its
operations it discloses to the public. (See box on
www.give.org). Consumer Reports WebWatch also gives
tips for avoiding online charity scams. Check out the tips
at www.consumerwebwatch.org.
National Insurance Crime
Bureau
 In the swarm of 2005 hurricanes, the National Insurance Crime Bureau
(NICB) sent teams to the affected states to help identify and catalog
flooded vehicles and boats. A database was created by this joint
effort between insurers, state fraud investigators and the NICB in which
vehicle identification numbers (VINs) and boat hull identification
numbers (HINs) from flooded vehicles were made available to law
enforcers, state fraud bureaus, insurers and state departments of
motor vehicles.
 The database, which was developed and is still maintained by the
NICB, is online and can be accessed by the general public. Initially,
the database identified potential fraud of more than $11 million. As a
solution to the flooded vehicle problem, one auto insurer decided to
crush its insured vehicles that were flooded. By the end of 2006, there
were 309,000 vehicles in the database, of which 200,000 cars and
trucks had been cleaned and resold. About 10,000 of those vehicles
were moved to other states and had titles that did not disclose that
the vehicles had been flooded.
Planning ahead
 Go to the experts. Weather and seismological forecasters often meet with
insurers to assess the level of risk. Often those conferences can make good
articles, as well as provide documents and sources in time of crisis.
 In July 2006, scientists with the Northeast Hurricane Project met with insurance
executives for the first time ever to unveil computer models with a startling
doomsday prophecy.
 If a Category 3 hurricane with significantly less strength than Katrina hit the coast
of central New Jersey, damage would top $200 billion and cripple the U.S.
economy for years.
 The combination of weather conditions and concentration of high-priced
coastal real estate would make a direct hit on the beach communities and
industrial New Jersey the most expensive storm in U.S. history – damage that
would eclipse the cost of September 11 and Hurricanes Katrina and Rita
combined. "The risk is increasing and it's increasing every year," catastrophe risk
analyst Karen Clark said at the time. Clark is the president and CEO of AIR
Worldwide.
The Boulder conference
 Experts on all types of disaster meet each June in
Boulder, Colo., as part of the University of
Colorado’s Natural Hazards Center’s annual
meeting.
 The conference is rich with researchers, scientists,
emergency workers, risk analysts and insurers,
who use economic models to estimate potential
damages and risks.
University of South Carolina
 According to USC’s Hazards and Vulnerability Research
Institute, 9 of 10 Americans live in places with a moderate
to high risk of deadly disasters, such as wildfires, hurricanes,
flooding, tornadoes, volcanoes, earthquakes, wind
damage and terrorism.
 That’s due to continued migration to coastal and Southern
cities. http://webra.cas.sc.edu/hvri/research/nsf2000.aspx,
Other resources
 Other fraud resources are the Tampa-based
Institute for Business and Home Safety, which
gives online tips for consumers to assist with
mitigating losses from all ranges of disasters, at
www.ibhs.org.
 Also, the International Association of Insurance
Fraud Agencies gives a good overview of other
issues facing the industry at www.iaifa.org.