I live thousands of miles from the devastated East Coast, where Hurricane Sandy wrought historic destruction. With that in mind, it’s easy to think the storm won’t affect me or my neighbors – but that would be a huge mistake. The fact is, Hurricane Sandy – and it’s estimated $50 billion price tag – could hit all of our bottom lines, whether you live in the storm’s path or not.
Let’s start with the silver lining of Hurricane Sandy – a tough feat when you look at those omnipresent pictures on the evening news. But there is a positive economic impact from Hurricane Sandy: the post- storm rebuilding efforts.
I’m not talking about the communities coming together to support one another, or even politicians temporarily putting aside bipartisan bickering to reach across the aisle all in the name of storm relief. Instead, I’m talking solely about the boost rebuilding from Sandy could give to GDP. As Business Insider explains, “In the near-term the hurricane-impacted high frequency data and seasonal adjustments may be off for a couple of months. Longer term however, the impact on the overall economy should be minimal… Although we may see some weakness within the first month or two, the economy seems to be stable six months out.” Using data from JPMorgan, the article compares the GDP – and other economic indicators – for major storms like Hurricane Katrina, Hurricane Andrew, and Hurricane Irene. The results are promising; in every case, GDP grew in the six-month period following landfall, as rebuilding efforts got underway. Although this kind of growth is not a given (many economics argue we could see GDP fall in the short term), at least some experts believe it’s a possibility.
This could also have a positive impact on unemployment, at least regionally, as construction workers – often seen as one of the hardest hit economic sectors in the Great Recession – are put to work to rebuild hard-hit communities.
Of those estimated $50 billion in losses caused by Hurricane Sandy, only a fraction of those losses – between $10 and $20 billion – were insured. That means thousands of property owners could be looking at covering their expenses completely out of pocket, or fighting long-term battles with their insurance providers, like we saw in the aftermath of Hurricane Katrina.
But it doesn’t stop there. Although New Jersey Governor Chris Christie signed an executive order last week preventing insurers from levying huge deductibles on homeowners, you may not be so lucky. While some states – like Florida – have laws in place that don’t allow private insurance companies from hiking your rates to cover losses elsewhere, not every state has such protections.
What does that mean for you? When insurers are forced to pay out large sums of money – that eat away at their capital reserves – they try to find ways to recoup their losses. That often turns into insurers turning to state regulatory boards, asking for permission to increase insurance rates and your premiums. Hurricanes and other large-scale natural disasters often give insurers leverage in getting their rate increases passed.
In times of trouble, we’ve come to depend on charities like the Red Cross and Salvation Army to do what the federal government cannot – give regular citizens a chance to lend a hand to people hundreds or even thousands of miles away.
Scammers put all that in jeopardy.
New York’s attorney general has already reported many scammers targeting storm victims – everyone from unlicensed contractors to fake charities. Even if your charity is legit, it’s worth noting exactly what percentage of your donation is going to the people who need it most. Everyone should be contributing more to charity, and sites like Charity Navigator can help you bridge that gap; the site provides you with data on just about every charity out there, helping you make a more informed decision about your charitable contribution.