After Hurricane Harvey, the Texas insurance industry will really be put to the test. While the government has pledged a great deal of money to rebuild infrastructure, many homeowners will rely on their insurance to rebuild their homes. With extreme flooding damaging homes up and down the coast and especially around Houston, that is sure to put a strain on insurance company resources.
This issue will further be complicated by an unexpected factor: the lack of construction workers to do the rebuilding. According to Vox, much of the major rebuilding that took place in New Orleans after Katrina was done by undocumented workers. With recent crackdowns on that workforce, and with a very low unemployment rate, construction companies are struggling nationwide to find enough workers.
What workers they can find will cost more than most companies are used to paying as well, since undocumented workers were obviously cheaper to hire.
All that means that the situation in Houston will be, as Vox put it, “ripe for exploitation.”
That exploitation may take different forms. It may mean, as in New Orleans, paying people (even legal American workers) to do dangerous work for little pay (that is if they can find them). It may also include, and this is at least as likely, a conscious effort to appraise property at its actual value. Appraisers on the ground in Texas will have a heavy burden reappraising for clients after the initial valuation placed by the insurance companies. The importance of this job cannot be overstated for the coming years. Should insurance companies fail to meet the true value of a victim’s home, they may never receive enough compensation to rebuild their homes at all.
It seems highly likely, unfortunately, that just like in the case of Katrina, the federal government is woefully behind on what is required for the situation. Just as the Katrina response was famously slow, so Congress has been slow now to approve the necessary funds to get a strong start on the recovery. Having approved only $8 billion in aid (when an estimated $180 billion will be needed), the government looks as likely to cut corners as the insurance companies, leaving Houston in a very tough position indeed.
With aid needed elsewhere as well (specifically, in southern Florida and Puerto Rico), Houston, despite being the fourth biggest city in the country, may find itself a lower priority in the near future. Should another major storm hit either this year or next, it is hard to say how much more aid can be counted on at that point.
Which leaves Houston with a major crisis, one far slower in coming than Harvey. It may be years yet before Houston is aware that the insurance companies and the government have failed to meet obligations, and that the former is near bankrupt, and the latter is too busy to help.