Florida, Hurricanes and Airplanes: A Second Look
As I sort through the e-mail from Monday's blog about hurricane preparedness in Florida—or lack of it—another storm is careening around the Caribbean and two or three more tropical waves are queued up east of Leewards. This season is shaping up like a do over of 2004.
For those who don't live along the Gulf coast, understanding why it's so enervating to plan an aircraft evacuation ahead of storm requires some explanation. I relocated our Mooney four times in 2004 and once in 2006. Those experiences taught me some lessons about decision-making and risk.
First, the notion that you have to wait until the weather gets too bad to fly before knowing where the storm will go is not really accurate. The National Hurricane Center has steadily reduced its track error in forecasts. In 2006, for example, the average 24-hour forecast track error was 58 miles, while the 48-hour track error was 112 miles. Those aren't quite take-it-to-the-bank numbers, but they're impressive. At 24 hours, even a slow moving storm—that's about 10 knots in these latitudes—is 240 miles away. Rare is the hurricane that produces consistently unflyable weather that far out. You can usually duck out around the bands, if there are any. Fast moving storms provide even greater margins.
So the decision-making process is sort of a rolling set of constantly changing variables, one of which is how confident you are in the NHC's track progs. And second, do you plan to move the airplane somewhere secure and return to your home or just let the storm pass and return later? If you decide to bolt early, you have to accept that you may be making a 236-mile error in judgment. (That's the average track error at 96 hours.) So be it. Make the decision and go, without recriminations, secure in the knowledge that any conservative decision is a good one.
Deciding where to go can be a challenge, more for Floridians than for other Gulf coast owners. Most storm tracks in Florida have a strong northerly component and because the peninsula of Florida is only about 150 miles wide, the no-brainer plan of flying 300 miles perpendicular to the predicted storm track rarely works. As a result, it's quite possible that you can move the airplane from an area the hurricane will skirt and into one it will devastate. This has happened and it's always a risk. So if you're moving an airplane out of Florida, really move it—well into Georgia or Alabama or along the Gulf coast. I took the Mooney as far as New Jersey once.
Moving an airplane to avoid a storm assumes that all of your basic prep is complete. If it isn't, the airplane is the least of your worries. The basics include house shuttered, cars secured, supplies stored, generator gassed up, pets cared for. Personally, I have all of this ready and waiting by March, so all I need is two hours to bolt up the shutters, then I can tend to the airplane and move it…or not. I have reason to be a little airplane centric and obsessively loss-prevention oriented. I toured Homestead Airport after Hurricane Andrew wiped it from the face of the planet in 1992. And not right after, either, but several weeks. There were piles of broken airplanes, shredded bits of aluminum and concrete pads that used to be hangars and a lot of shell-shocked former owners wandering around. One of them practically grasped me by the lapels and said that if I ever faced a looming hurricane, move the airplane, if practical. Losing it and his house had been traumatic and, he said, at least part of that loss could have been prevented.
Speaking of which, in my blog Monday, I wasn't clear about the Florida insurance industry's lax attitude toward loss prevention. Avemco's Jim Lauerman wrote to note that Avemco's losses from Category I hurricanes have been minor in the past decade so it has concentrated its efforts on the more meaningful aspect of loss prevention: accident avoidance. He's right, too. My beef with lack of loss prevention effort is aimed more at the property and casualty companies, especially in Florida. Still, I think aviation insurers could do more to raise the general consciousness of loss prevention and to at least encourage owners to consider hurricane flyouts by offering discounts or logistical support. A little money spent there could save millions in claim payouts. It would at least reorient thinking to favor loss prevention in general, which is something we have to do in this country.
A couple of readers took me to task for complaining about the Florida insurance industry's isolating risk to Florida and setting rates accordingly. The so-called "four pups" of Florida are separate companies formed by four major national insurers, the industry executives claiming that this keeps a big Florida hurricane from dragging the mother companies into bankruptcy. This gives readers outside Florida the idea that they are somehow "subsidizing" my easy-street, sunny lifestyle.
"In most of the post you complain that people don't take enough personal responsibility, yet you want policyholders in the rest of the country to subsidize your decision to live in sunny Florida? How do you square those two beliefs?" wrote one reader.
Well that one is easy. It might surprise you to learn that in 2006 (and likely in 2007, too), First Floridian, a pup of Traveler's Indemnity, paid a $21 million dividend to its parent and generally had record profits from its Florida operation. So whom is subsidizing whom? This, by the way, occurred in the same year that Nationwide Florida—another pup—asked regulators for a 71.4 percent increase in premiums for its Florida customers. And rates are only part of the issue. The larger problem is cherry picking—insurers have dropped vast numbers of customers in favor of minimal risk properties that they can then extract large premiums from. When I was dropped by my company, they didn't even take note of the thousands of dollars I had invested specifically in hurricane hardening.
So what you've got is a one-way safety valve in which Florida residents pay usurious premiums that funnel nice profits out of the state while the companies are insulated from loss by the convenience of letting the pups fail if a major storm strikes. (That they haven't done this yet is no guarantee that they won't.) It may be fashionably cynical to say, "well, you moved to Florida, so you deal with it." But there's a national interest here. You could say the same thing about New Orleans. But if you're a farmer in the Midwest, you have an interest, because the port of New Orleans ships your grain to overseas markets. Where do you think the people who work in that port live? Do you heat with oil in Des Moines? Lots of it comes up the Mississippi from New Orleans. Do you like orange juice and fresh veggies during the winter? Guess where that stuff comes from? That's why a national risk pool makes more sense than isolating Florida or any other state.
And this is why localizing the risk pool is a broken system. According to J. Robert Hunter, director of insurance for the Consumer Federation of American and a former Texas insurance regulator, long-term loss rates in Florida are only 2 percent above the national average, a trivial difference. Insurance companies do face risks of major payouts for an Andrew or a Katrina, but just as we expect Florida residents to plan for and protect themselves from storms, so should we expect the same of insurance companies. Hunter thinks—and many agree—that the Florida market is a gravy train when losses are low and hardly the money sink the industry claims when they aren't.
That's not an argument that a homeowner who lives in Tampa should pay the same premiums as someone in Dayton. Clearly, Florida homeowners represent more risk and should pay higher rates. But there's nothing new about that. Insurance rates have always been regional and competitive. What is new is the distortion of the market by the major insurance companies whose sky-is-falling shrieks convinced the state to allow them to set up the Florida-only companies in the first place.
What's needed most is insurance company managers who can look far enough beyond their own noses to see past the third quarter and catch of a glimpse of what's called good corporate citizenship. Like any businesses, they have responsibilities to their shareholders, but also to their customers to provide products and services that are affordable and yield profits over the long haul. When they distort the market to drive short-term profits, corporate citizenship is the last phrase I'd use to describe the results.
UPDATE: SATURDAY, AUGUST 30, 4:30 P.M. As Gustav pounds Cuba and sets course for the central Gulf of Mexico, it's interesting to consider where you could evacuate an airplane from now in Florida if you had to. With the storm due to be abeam of Key West to the west at 8 a.m. Sunday, you could still make it out of Key West at this hour, although you'd need good radar to navigate the thunderstorms found in some of the spriral bands. I'm a little surprised Key West is only under a tropical storm warning and that no evacuations are under way. Key West will be on the northeast side of the storm and it wouldn't take much of an eastward jink to see high winds on the island.
Here on the west coast of Florida, we've had one powerful band with gusts and thunderstorms. But there are still flyable routes out of Florida. Twelve hours from now, I wouldn't bet on it, even though we'll be 250 miles from Gustav's center.