Insuring Themselves Back to Health.

Insurance agents aren’t often thought of as first responders, but in a storm like the Joplin tornado, they were some of the first ones in. They’re also part of the reason why Joplin’s received $2.16 billion from the insurance companies, money that’s helped get the city moving ahead of schedule.

story by Dan Oshinsky / photos by Dan Oshinsky
published July 12, 2012

They were so close. Two years Paul Comstedt had been working on opening a gymnastics center in Joplin. Two years! Two years to find the right location, to get the business set up, to hire the team — 10 staffers in all — to find the equipment and secure the SBA loan to buy it. Two years to make that all happen.

There were just a few steps left before the grand opening, but Paul remembers this one well. He was in Shelly Kraft’s office over on Bird Avenue. His business needed insurance, and Kraft was his agent. She laid out several insurance options. One would provide about $300,000 in coverage in case something happened — roughly the amount Comstedt and his co-owner, Kip Johnson, had already pumped into Amplify Gymnastics. The other would cover up to $900,000 in damages.

Shelly went through all of the policy options. She laid out why a business like Amplify might want a more comprehensive policy. If the worst happened and the building was completely destroyed, the more expensive policy would cover everything. It would even cover the cost of replacing the Amplify property.

The Amplify team wanted to know what kind of worst-case scenario Shelly was talking about.

“I literally said, ‘You could have a tornado,’” Shelly remembers, “and laughed.” She’d advised Joplin businesses on insurance policies for more than a decade, and her husband, Randy, had 20+ years of experience in the field. Together, they’d written thousands of policies for Kraft Insurance, the Joplin-based insurance agency Randy had founded two decades earlier. Everyone always asked about the more comprehensive coverage, but Randy says hardly anyone bought it.

Most people don’t buy insurance with the unthinkable in mind, he says. They buy with both eyes on their wallets, and Amplify was no exception. Paul and Kip looked at the policies on the table, and then they thought about their bank accounts. Two years they’d been in this, and now it was almost June 2011, and Amplify was set to open.

They made an executive decision. The more comprehensive policy would cost an additional $450 per year. So for now, they’d go with the cheaper policy. When parents started signing their kids up for gymnastics classes — when the money started coming in — they’d come back and bump up their policy.

“Unfortunately, we needed it in the first month,” Paul says.

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Construction continues at the former site of Joplin High School.
(Above) Construction continues at the site of Joplin High School. (At top) The damage to Amplify Gymnastics, and Paul Comstedt in the brand new facility.

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It’s the displaced families that received the lion’s share of news coverage after the May 22 tornado in Joplin, but for insurance companies, the real story of the tornado is one of commercial losses. Amplify Gymnastics was one of 553 businesses in town that had its property damaged or destroyed in the storm, according to the Joplin Chamber of Commerce.

The May 22 tornado ripped a path through the center of town, and it took Amplify’s new building with it. When Paul arrived at the gym’s location, he couldn’t even find his property. All he saw was debris. Everything inside the building was destroyed.

That’s a common story around Joplin. As of May 10, insurance companies have paid out $2.16 billion in claims to Joplin residents and businesses. [1] What’s unusual is that businesses account for 64 percent of the total claims paid out. Usually, according to Dr. Robert Hartwig, economist and president of the New York-based Insurance Information Institute, homeowners account for two-thirds of all claims in a tornado. Here, they accounted for only two-fifths of the total claims.

This storm hit Mercy Hospital, and it hit many of the small businesses near downtown. These businesses largely sit in what FEMA officials later termed the Expedited Debris Removal zone — the area that suffered the worst of the tornado — in a stretch between 20th and 26th Streets.

All in all, insurance companies have written $1.39 billion in checks for commercial losses. Those businesses are the reason why this storm featured “very, very costly claims that are unusual for tornadoes,” Hartwig says. [2]

The storm hit all types of businesses: Restaurants, offices, even insurance agents like Jerry Sitton, a State Farm agent who’s still in a temporary location as he waits to rebuild in his former location on 20th Street. All in all, the Chamber estimates that more than 4,500 workers were directly affected by damages caused by the storm.

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Shelly Kraft spent the hours after the storm under a tree in the parking lot of Kraft Insurance. It was the only spot where she could get cell phone reception. [3] There were still thunderstorms in the area, but her phone kept ringing, so Shelly stood under the tree taking claims. A few feet away, part of the roof had lifted off the Kraft Insurance building. Projectiles had pierced the front entryway. Inside, much of the building was soaking wet.

Kraft Insurance stood right in the line of the storm, just down the block from Mercy. The surrounding buildings were mostly wiped out.

Somehow, Kraft Insurance was still standing.

Randy was already working on a plan to get a temporary office set up in the Holiday Inn near I-44. Randy and Shelly weren’t worried about building back. They knew they had great insurance.

Not all of their clients did. The clients had been warned that a tornado could hit. But the conversation was always about “if,” and never about “when.” It was always a possibility, the Krafts say, but never a reality. Joplin residents had never known a storm quite like this.

Over the coming months, the Krafts dealt with some 2,000 claims, and helped pay out more than $100 million to clients. Insurance agents aren’t often thought of as first responders, but in a storm like the Joplin tornado, they’re often the first ones in. Some first responders bring axes and rescue vehicles; some bring checkbooks.

The Krafts worked with insurance adjusters from all across the country and from dozens of different companies. Many of the adjusters were unfamiliar with Missouri statutes. They dealt with inconsistencies, and they shook their heads at some of the decisions being made by the adjusters. [4]

“Being in business for 20-some years, I’d never seen insurance companies react this way,” Randy says.

Those with good insurance came out of the storm okay. The Krafts, for instance, note that their recently opened office — at the original location on Bird — is better than it was before. They were made whole in the storm.

Joplin favorites like Dude’s Donuts and established chains like Chick-Fil-A have reopened quickly thanks to those insurance checks, with residents often lining up before dawn to support their local establishments. [5]

Other businesses weren’t so lucky.

The Chamber of Commerce has been keeping tabs on the business community in Joplin. Of the 553 businesses damaged or destroyed in the storm, 468 — more than 83 percent — have reopened or are in the process of reopening. They’ve put that $1.39 billion from the insurance companies to use.

But at least 40 businesses have told the Chamber that they will not — or cannot — reopen.

“Some businesses, regrettably, were underinsured,” says Kirstie Smith, communications director for the Joplin Chamber of Commerce. “We saw very, very, very few that were uninsured completely — fortunately.”

But even those businesses with merely good insurance are still shaking their heads, wondering why they didn’t pay just a few hundred dollars a year more for better coverage.

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Shelly and Randy Kraft, in front of their new building.
Shelly and Randy Kraft, in front of their new building — paid for thanks to their pre-tornado insurance policy.

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Take Paul Comstedt and Amplify Gymnastics. He had opted for a less-comprehensive policy. And the day of the storm, walking around what was left of his property — “There was literally nothing here,” he remembers — he started thinking about what he’d get back from the insurance companies.

“At the time, we were such poor businessmen,” he says. “We had just started, and we didn’t have any income, so we just went with what was cheaper. Clearly, it wasn’t the wise choice.”

That day, he texted Shelly to let her know about the building. By the time he got her on the phone, he says she’d already started to file the claim.

In all, Amplify got back what they’d put into the business — several hundred thousand dollars. Much of their equipment was still en route to the gym, and those manufacturers took back the now unnecessary equipment.

But when it came time to decide whether or not to rebuild, the Amplify team looked at the numbers. They had gotten their money back, and they now owned a piece of land, but they had no building. Getting it back up could cost hundreds of thousands more. They weighed the options.

“On one hand, it was like, ‘Do you throw all that away and not do it again?’” Paul says. “Or do you decide it’s worth it to keep going and try to do the whole thing all over again?”

One thing kept Paul going: The kids. Paul had been interested in serving as a mentor to youths, and he saw the gym as a way to merge mentorship with athletics. He felt a sense of obligation to serve his community in any way he could.

“Parents wanted their kids to have a sense of normalcy,” he says, “and kids need a sense of normalcy. And they didn’t have that.”

“At the time, we were such poor businessmen. We had just started, and we didn’t have any income, so we just went with what was cheaper. Clearly, it wasn’t the wise choice.”

But they still needed money to build the new building. That’s where the Small Business Administration (SBA) came into the picture. Within four days of the storm, the Chamber of Commerce had helped set up the Business Recovery Center, featuring business, legal and accounting assistance for Joplin businesses. From the Recovery Center, the SBA started giving out loans. The disaster-specific loans came in two forms: Economic injury loans, which covered loss of business and capital due to a disaster; and physical disaster loans, which covered lost physical assets. Amplify was applying for the latter.

In most cases, the SBA wants to see the history of a business — their tax filings, their balance sheet — before they sign off on a loan. But with Amplify, the SBA couldn’t look at their business history, because they didn’t have any.

“They are by far one of the more unusual stories because of where they were in the opening process,” the Chamber’s Smith says. “Those guys had spent years getting the plan in place, and had done everything ‘right.’ They’d saved, and made a good plan. They were smart. They didn’t just run into business. And then to have it all blown away.”

Amplify brought the SBA the best document they could: their business plan. They walked through the next steps for the business.

In the end, the SBA gave Amplify the loan — one of 96 given out to businesses, totaling more than $13.9 million.

“We felt very blessed and thankful to have those resources,” Paul says.

Construction moved quickly on the new building. Amplify had its grand opening Feb. 25, and classes started March 5. They’d originally been hoping for 100 athletes — and even that seemed like wishful thinking at the time. By the end of the first month, they had 200.

Within a year, they believe they’ll be at capacity, Paul says, with 300 athletes taking at least one class per week.

Of course, there’s still the loan to pay off. They’re hoping — optimistically, Paul notes — to get it off their books in the next decade. He says he plays the “what if” game, sometimes. What if he’d bought the more expensive insurance policy in the first place? What if their construction costs had been covered by insurance? What if they were debt-free, and already looking to expand?

But it’s never too long before the what ifs give way to reality. They do have this loan to pay off, but they also have a functioning, expanding business. They’re thankful for that.

And they’ve learned their lesson. The new insurance policy — if another tornado was to hit Amplify — would cover everything. [6] The Krafts say that since the storm, their customers — especially on the business side — have been much more willing to ask questions about their insurance.

“It’s good,” Paul says of his new coverage. “It’s a lot more comprehensive.” He laughs. He’s built this business twice. He doesn’t want to do it a third time — but if he does, he wants the insurance companies fully on his side.

If there’s ever a next time, he will.