In the wake of Hurricane Sandy, thousands of homes, miles of power lines, and as many as 250,000 cars may have been destroyed. The states' insurance companies will make reimbursements to as many as people as possible, but reimbursements may come in a different form this year.
In an effort to make insurance reimbursements accessible for everyone, New Jersey Governor Chris Christie signed a new executive order that allows the state's regulated insurance companies to send out paper checks or prepaid debit cards. Previously, companies could only mail out checks to those needing to replace property damaged in a natural disaster.
The goal is to reduce the friction created by relying on paper checks. Prepaid debit cards allow a user to make purchases immediately without waiting for a check to clear the bank or the banks to even open after a natural disaster.
Consumers are given a choice in the matter. According to the law, the state requires that insurance companies give their customers a choice between a check or prepaid debit card, and that the prepaid cards are sent without a fee. So far, it seems as though card providers are happy to work within those requirements. Prepaid cards are easy and inexpensive to make, mail, and fund – and the insurance companies find that those who lost property in the storm can make much faster use of a prepaid card than a paper check. Additionally, the credit and debit card processors can cover some of the cost of producing the card through small merchant processing fees charged to the businesses who accept the cards.
So far the program appears to be a win-win. If it's successful, some believe the next step would be to process New Jersey's tax refunds by mailed prepaid card, too.