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11/16/2004

D2 T U ES DAY, NOV E M BE R 1 6, 2 0 04 T H E WA L L ST R E E T J O U R NA L . * * * *

PERSONAL FINANCE

Underwater, With No Insurance

U.S. Pushes Homeowners
To Expand Flood Coverage
In Wake of Recent Storms
By JEFF D. OPDYKE
Go home for
In the wake of one of the biggest hurri-
the holidays cane seasons in memory, the Federal
Emergency Management Agency is push-
(Stay comfortably elsewhere) ing homeowners—even those far re-
moved from typical flood zones—to reas-

a ming G˜ome h´re. sess their risk of being washed out of

their homes.
ø
Hel¬o, Th´ R ding in the ˙o†el Check out our Nearly 90% of all declared disasters in
the U.S. include a flooding component.
exclusive holiday rates.
I was s†ån ´ø˜e caµe up Yet even though between eight million
and 11 million homeowners live in flood
løb∫y wh en som. M¥ word, this Atlanta from
zones, only 4.4 million carry federal flood
insurance. And 25% of flood claims are
å˜d kißs´d me ˙tful am´ni†ˆes. Comfort Inn and Suites Galleria
$40 paid to victims living outside an estab-
lished flood zone and in zones labeled
UPI/Landov

p¬ace hås †houg Charlotte

La Quinta Coliseum
from
low-to-moderate risk for flooding. The up-
shot is that homeowners are generally
Weighing Your Flood Risk
Homeowners who want to know if they live in or near a flood zone, or who want to know
more about flood-zone maps, can go to these Web sites:
⁄

$49 ill-prepared for the most common disas-

ter they will likely ever face. Worse,
many wrongly assume their standard
Orlando from homeowner’s policy will cover a flood.
Best Western Plaza International
$52 Amid a surge in flood-damage claims
with the National Flood Insurance Pro-
Philadelphia gram, FEMA, the program’s administra-
from tor, is appealing to millions of homeown-
Wyndham Franklin Plaza Hotel
$72* ers at risk for flooding but who don’t have
flood insurance. Earlier this year, the
agency launched a Web site, television ad
Raleigh/Durham
La Quinta Inn & Suites from campaign and a toll-free number to help
homeowners assess their flood risk. And
Research Triangle Park $76 while the so-called FloodSmart campaign
seems an obvious tactic in coastal and
low-lying communities routinely drowned
Nashville from by hurricanes and river overflow, federal
Holiday Inn Nashville Downtown
$84* officials say folks living well outside estab-
lished flood zones—like up the side of a
mountain—are also potential victims.
One group of homeowners FEMA
hopes to reach: Homeowners who bought
their house entirely with cash—such as
retirees relocating to places like Florida
and other Southern coastal states. These
homeowners often skip flood insurance
because they aren’t forced to buy it,
whereas home buyers who rely on a mort-
gage are required by a mortgage com-
pany to purchase flood insurance for a
house in a flood zone.
1-888-TRAVELOCITY More than 41,000 homeowners from Lou-
isiana to Connecticut have filed for flood
travelocity.com/holidays damage with the flood-insurance program
due to the hurricanes that stormed ashore
America Online Keyword: Travel this year. That nearly matches the number
of claims the agency receives in an average
year for all types of floods. With Hurricane
Ivan, homeowners have filed claims in 60 of
*Some properties have special offers, including free breakfast or room upgrades. Some restrictions apply. See site for details. Prices are in USD, per room, per night, based on the 67 counties in Pennsylvania—not rou-
double occupancy. Prices do not include taxes and/or fees. Room rates are subject to availability. Book by 12/31/04. Please visit travelocity.com to confirm availability of current tinely considered a part of the flood belt.
offerings. ©2004 Travelocity.com LP. All rights reserved. TRAVELOCITY, the Stars Design and The Roaming Gnome are trademarks of Travelocity.com LP. CST# 2056372-50. Jeff Grady, president and CEO of the
Û
n www.floodsmart.gov
The National Flood Insurance Program’s site provides an assessment of flood risk
for a specific address—though the assessment can seem puzzling, since it places
into moderate flood zones some homes that would seem to be well away from any
flooding possibility. Part of the reason is that flood zones can change over time,
based on development and other factors.
n www.fema.gov
Fema’s Web site offers tutorials on reading and understanding flood-insurance
rate maps.
hasn’t seen water in centuries, and there billion in property is lost each year to
are lots of uncovered losses because of it.” flooding, of which the flood program has
Even wildfires can spark flooding, paid out $773 million annually in claims,
prompting the agency to note that homes on average, in the past decade.
in mountainous areas are also at risk for Homeowners often don’t discover that
flooding. Flood claims are pouring in their home-insurance policies are useless
from Southern California homeowners when it comes to floods until their posses-
whose property has been damaged by wa- sions are underwater.
ter and mudslides running off denuded Only flood insurance covers flood dam-
hillsides in the aftermath of the big wild- age, and the only place to buy it is
fires there last year. The flood-insurance through the National Flood Insurance Pro-
program handled roughly 50 claims in gram. Because flooding is so unpredict-
October from Californians living no- able and so catastrophic, traditional insur-
where near a river or the ocean. ers don’t underwrite flood coverage, they
Still, companies specializing in assess- just sell and service policies for the Na-
ing flood risk say just because a home lies tional Flood Insurance Program. The poli-
within a flood zone doesn’t necessarily cies cost as much as $1,800 a year for a
mean it is at risk. Dan Freudenthal, presi- house situated in a known flood zone.
dent of Flood Zone Correction Inc. in West Prices drop to just a few hundred dollars
Palm Beach, Fla., says flood maps as-
sume every home within a flood zone is at
a year for homes in zones labeled low-to-
moderate risk.
risk when, depending on how a home was Still, flood insurance isn’t a panacea.
built, its elevation and the drainage Flood coverage taps out after $250,000 of
around it, “your house may not be at risk damage to a home, and $100,000 of dam-
for flooding at all.” Flood Zone Correction age to contents. Homeowners who need
helps homeowners remove their homes more coverage will have to look to the
from the list of so-called Special Flood Haz- private market, through companies like
ard Areas, which carry the highest insur- Lloyds of London.
ance rates in terms of flood coverage.
Journal Link: WSJ.com subscrib-
Insurance officials say homeowners
1

Florida Association of Insurance Agents, anywhere within a flood zone should be ers can see Consumer Reports’
In other wø®ds, fa lå la la lå la lå la la... says in the panhandle town of Pensacola particularly careful about eliminating guide and ratings for homeowners
“water from Ivan got into areas that their coverage. In all, an estimated $3 insurance, at WSJ.com/JournalLinks.

‘Virtual Debit Card’ Aims to Combat Online Fraud

By JENNIFER SARANOW
Consumers typically have been wary
of using bank cards online. One bank’s
solution is to get rid of the cards.
In an effort to ease customers’ con-
cerns about fraud and identity theft
when shopping online, PNC Bank has
launched a new checking account with a
“virtual debit card.” In addition to a regu-
lar debit card that can be used at auto-
mated teller machines and in stores, the
“Digital Checking” account comes with
an “eSpend” card. The card is basically a
piece of paper with an account number,
expiration date and verification code for
making purchases online, over the phone
and by mail order. Customers can set a
daily limit for their eSpend card (say
$1,000) and once that amount is spent,
additional purchases won’t be approved.
PNC Bank, a unit of PNC Financial
Services Group Inc., Pittsburgh, hopes
the eSpend card will attract people who
want to make purchases online with their
debit card but are uncomfortable doing so
for fear of making their bank account vul-
nerable to fraud.
If an unauthorized person obtains a cus-
tomer’s eSpend number, only the specified
daily limit could be taken out of a custom-
er’s bank account. If this occurs, PNC says
customers aren’t liable for the charges.
Purchases made with the eSpend card
show up separately on bank statements.
The account, which is aimed at online-
banking customers, also comes with iden-
tity-theft reimbursement insurance, a
debit card rewards program and no fee for
using non-PNC ATMs. The account has a
monthly $11 service fee unless customers
opt for direct deposit of paychecks or gov-
ernment checks such as Social Security,
and pay at least three bills online.
The eSpend card comes as debit cards
are quickly overtaking cash and checks
as preferred methods of payment. Accord-
ing to a report from the American Bank-
ers Association and Boston-based Dove
Consulting, 31% of in-store purchases
were made with a debit card last year, up
from 21% in 1999.
Consumers typically have been wary
of using debit cards online because, unlike
credit cards, they are directly tied to bank
accounts. But online use of debit cards is
starting to grow. In the first quarter of this
year, Visa debit cards were used for 46%
of online purchases, up from 43% a year
earlier, according to Visa International.
Analysts are skeptical about how ex-
cited consumers will be about PNC’s new
card. “I think it’s an interesting idea but
if you look at consumer usage, consum-
ers are using their debit cards online to-
day in increasing numbers, so it’s un-
clear how much of a demand there would
be for a card with that unique applica-
tion,” says Tony Hayes, a Dove analyst.
Other banks have long offered similar
credit-card products as a way to encour-
age purchases on the Internet and reduce
the amount of fraud they are liable for. In
June of 2002, for example, Citigroup Inc.’s
Citibank launched free, downloadable soft-
ware that allows credit-card customers to
obtain a new disposable account number
each time they make a purchase online. A
downside: Such “virtual account num-
bers” can’t be used when a credit card
must be shown at pickup.

SmartMoney
7
Fund Screen/Health-Care Funds

T HE PROSPECT OF a second term for George W.

Bush has proved to be good medicine for health-care
funds. For the week that included Election Day, the
group jumped 4.2%, compared with 3% for the Standard
& Poor’s 500-stock index, according to data from invest-
ment-research firm Lipper Inc.
The Bush victory—which calmed investor fears of
greater involvement by the federal government in
health care—is a bright spot in an otherwise tough
year for the industry, particularly among pharmaceuti-
cals companies, which have faced obstacles including
pricing pressures, weak research pipelines and patent
expirations, analysts say. Rising litigation risk is also
a major concern, as investors fear that Merck & Co.,
whose stock was pummeled when it withdrew its
Vioxx painkilling drug, might portend future problems
for the sector.
Despite the recent run-up, many health-care stocks
still seem inexpensive. The group as a whole gained just
2.8% in 2004, as of Nov. 9, compared with 6.2% for the S&P
500. And the long-term prognosis for the industry remains
strong. You’ve heard it before, but it bears repeating: As
the enormous baby-boomer generation marches toward re-
tirement, demand for health-care products and services is
expected to increase greatly.
Although some funds slice the health-care universe
quite thin, a broad health-care fund is the most suitable
investment for most investors. “The narrower you go, the
more risk you take on,” says Phil Edwards, managing di-
rector of investment services at Standard & Poor’s.
We screened for top-performing no-load health-care
funds. Our criteria: three- and five-year annualized re-
turns in the top 50% of the classification and expense ra-
tios in the bottom 50%. We also looked for net assets of
at least $50 million, a minimum initial investment of
$5,000 or less, and availability to new investors. Seven
funds made the cut. —Dawn Smith

Lock in the prime rate. Seven Top-Performing Health-Care Funds

We screened for high returns, low expenses and net assets of at least $50 million.
MINIMUM
ANNUALIZED ANNUALIZED INITIAL
FUND (TICKER) 5-YEAR RETURN 3-YEAR RETURN EXPENSE RATIO INVESTMENT

Introducing the new Capital One PrimeLock Card. Fidelity Select Medical Delivery (FSHCX) 19.89% 16.44% 1.30% $2,500
Finally, a credit card that’s always as low as the Prime Rate – now 4.75%.* Avoid introductory rates that Fidelity Select Medical Equipment & Systems (FSMEX) 18.46 14.43 1.18 2,500
expire after a limited time. With the PrimeLock Card from Capital One, your rate is set at prime for as long as Exeter Life Sciences (EXLSX) 18.34 4.52 1.18 2,000
you have the card. Get in on the rate other banks only give their biggest customers. Get the new Capital One Icon Healthcare (ICHCX) 15.98 11.24 1.34 1,000
PrimeLock Card. No more rate-watching. No more worries. No more hassles. Pimco RCM Biotechnology (DRBNX) 15.28 0.31 1.61 5,000
Pimco RCM Global Health Care (DGHCX) 14.14 2.15 1.61 5,000
T. Rowe Price Health Sciences (PRHSX) 11.11 5.78 1.00 2,500
Note: All data as of Nov. 9, 2004 Sources: Lipper Inc.; company reports

*Prime Rate as of 10/1/04. By mail only. Applies only to new and qualified applicants. Rates subject to change if the account is not kept in good standing.
Additional restrictions apply. Terms subject to change without notice. © 2004 Capital One Services, Inc. All rights reserved. To learn more about Fund Screens, including how to create your own, visit www.smartmoney.com/wsj_fund.

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