2004-9-16
This is Gwen Outen with the VOA Special English Economics Report.
People who own something valuable, like a house, want to protect
themselves against financial loss. Natural disasters like fire,
storms or flooding can damage or destroy valuable possessions. An
agreement offering financial protection against loss is called
insurance.
An insurance agreement is called a policy. It says that the
policyholder will pay the insurance company an amount of money
called a premium. In return, the company will pay for financial
losses if something happens to the policyholder's property.
Recently, insurance in the American state of Florida has become a
big issue. The state often suffers powerful ocean storms called
hurricanes. Two major hurricanes, named Charley and Frances,
recently hit Florida and caused a huge amount of damage.
In nineteen ninety-two, Florida suffered the most costly natural
disaster ever, Hurricane Andrew. Insurance companies paid almost
twenty-one thousand million dollars to repair the damage.
At the time, some insurance
companies considered leaving Florida. They said that it was too
risky to do business in the state.
After Hurricane Andrew, Florida changed its insurance laws. It
began saving money for hurricane damage. The state formed an
organization to provide some insurance for people who could not buy
insurance from companies.
Florida permitted insurers to increase premiums by twenty-four
percent or more. Insurance companies also stopped insuring about
ninety thousand people in the state. Some companies split their
Florida business from their main business.
Today, Florida law says that people with home insurance must pay
from two to five percent of the value of their homes before
insurance will pay for any repairs.
The Insurance Information Institute estimates that Hurricane
Charley will be the third most costly natural disaster in American
history. That does not include the effects of Hurricane Frances.
So far, insurers in Florida report that they have enough money to
pay most insurance claims. But, experts say a few insurance
companies may fail.
Insurance companies pay out one dollar and seven cents for every
dollar they collect in premiums. Insurance companies make a profit
by investing the money they collect.
This VOA Special English Economics Report was written by Mario
Ritter. This is Gwen Outen.