Chapter 4 deals with insurance, which was devised to address not only the ups and downs of the financial markets but the ups and downs of life, as well. Since there’s no way for us to know the future, whether good or bad, insurance is a way to help blunt the bad things that come along.

“The Big Uneasy”

Ferguson uses the example of Hurricane Katrina, which hit New Orleans and surrounding areas in 2005, to begin the discussion of insurance. Almost 75% of the city’s housing stock was damaged, and insurance claims totaled more than $41 billion, “making Katrina the costliest catastrophe in modern American history” (178). The aftermath of the storm also demonstrated the limits of private insurance, as many homeowners faced a struggle in trying to collect damages. For example, if a house was covered by insurance against wind damage but not flooding, some companies falsely determined the latter to have created the damage in order to avoid paying out on some policies.

A lawyer named Richard Scruggs, who owned a house on the Gulf shore, took legal action against the companies and won millions in damages for his clients. The federal government, however, still picked up the tab for those who fell through the cracks of insurance coverage.