Taylor, insurers lock horns over bill
In the end, Taylor's bill is the only viable proposal
Posted on Sun Herald Wed, Jul. 18, 2007
Rep. Gene Taylor, D-Miss., listens to opening remarks on Capitol Hill in Washington on Tuesday during a hearing of the House Housing and Community Opportunity subcommittee, as they consider the Multiple Peril Insurance Act of 2007.
By BRANDON PARKER
SUN HERALD WASHINGTON BUREAU
WASHINGTON -- One by one, representatives of insurance companies lined up along a crowded testimony table Tuesday to criticize a proposal to create a federal hurricane coverage program before a House subcommittee.
But after three hours of testimony, Rep. Gene Taylor's bill to add coverage for wind damage to the federally funded National Flood Insurance Program stood as the only viable proposal for insurance reform to protect against property losses like those from Hurricane Katrina.
Taylor says that insurers overcharged the NFIP for the property claims submitted by Gulf Coast residents after Katrina. Damage caused by flooding is covered by the NFIP, whereas insurers must cover wind damage under homeowners' policies. Taylor maintains that many companies took advantage of the NFIP, leading to the program's $17.5 billion deficit.
"Greed is the main disconnect in this situation," said Taylor, D-Miss. "It's easy for them to walk around in their Gucci suits and defend their companies, but the reality is down there on the Gulf Coast, where all of the destroyed homes and property of my constituents are. Of course, these companies don't want to change the rules that are currently in their favor.
"People who played by the rules and expected insurance companies to play by the same rules got screwed," said Taylor, whose bill would create financially sound premium levels to make the NFIP self-supporting.
But insurance industry representatives raised red flags about the costs of the proposal.
Ted Majewski, who represented the American Insurance Association, noted a company analysis that concluded Taylor's bill could increase the NFIP deficits by up to $200 billion in one year.
Furthermore, said Robert Hartwig, president of the Insurance Information Institute, the artificially low government coverage rates would encourage development in flood- and wind-prone areas by homeowners, who typically have insufficient catastrophe insurance.
He also pointed out that fewer than 20 percent of South Mississippi homeowners had flood insurance prior to Katrina and questioned whether homeowners would participate in the bill's voluntary federal program for wind and flood damage protection.
"The proposal's actuarially sound rates still do not address the lack of flood coverage penetration," said Hartwig. "It's not what will happen to the private sector, but what will happen to citizens and their taxpayer money."
Despite the concerns voiced by industry representatives Tuesday, Allstate and Nationwide insurance companies have sent letters to Congress calling for an expansion of the federal government's role in catastrophe insurance.
And the chairwoman of the committee, Rep. Maxine Water, D-Calif., chastised the insurance industry representatives for criticizing Taylor's plan without offering a solution to reform the NFIP to add wind damage protection.
Taylor hopes to see the bill approved by the House committee and sent to the full House for a vote before the August recess.
Original Sun Herald article here.
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