More Fla. mobile home owners skipping insurance
More than half of Florida's 800,000 mobile homes are no longer covered by homeowner's insurance -- another sign of the state's soaring insurance costs.
The number of insured Florida mobile homes dropped from more than 500,000 in 2004 to less than 400,000 last year, according to the state Office of Insurance Regulation.
Insurance costs have soared across Florida, but the situation is worse for mobile home owners who often find the cost of insurance is out of scale with the value of their home. Insurers are exceptionally wary of older mobile homes that lack some of the wind protection required after 1992's Hurricane Andrew, which scattered mobile home debris up to three miles.
Pinellas County has Florida's highest number of older mobile homes, about 46,000. There are more than 100,000 mobile homes in Pinellas, Pasco and Hillsborough counties.
James Ayotte, executive director of the Florida Manufactured Housing Association, said the newer homes fared far better than older models in the hurricanes of 2004 and 2005.
"Older homes have a bad rap. Is it deserved? Yeah. Past history is evidence of that. But there was not one catastrophic failure of a new manufactured home," he said.
Emergency managers said mobile home parks still have parts that can break loose.
"Year of construction is not a major concern," said Holley Wade, spokeswoman for Hillsborough County Emergency Management.
"Anything that's a mobile home is considered debris."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
N.C. House approves public financing for insurance commissioner race and others
The North Carolina House narrowly approved the expansion of a voluntary public financing program for three more statewide elected offices, a move meant to reduce the influence of special interest money.
Under the proposal, initially approved 53-52 after House Speaker Joe Hackney broke a tie, candidates for insurance commissioner, state auditor and superintendent of public instruction would be allowed to participate. The program is similar to one already used for Supreme Court and Court of Appeals candidates.
Those candidates who collect small contributions from at least 750 voters statewide before the primary would be eligible for taxpayer money of at least $300,000 for the general elections.
The program could blunt criticism that some Council of State candidates receive campaign dollars from groups that the office holder regulates, supporters said.
The $4.5 million pilot program "will tell us whether public financing does improve confidence in our system and does improve the quality of candidates who are running and the opportunity for candidates who want to run," said Rep. Rick Glazier, D-Cumberland, one of the bill's primary sponsors.
Final passage this year is unclear because the bill still must pass the Senate, and lawmakers are close to adjourning.
S.C. wind pool rates rise 35%
Rates for the South Carolina Wind and Hail Underwriting Association went up an overall 35 percent beginning July 19 under an approval from Scott H. Richardson, director of the South Carolina Department of Insurance.
In granting the increase, Richardson noted that loss data initially supported an overall increase of more than excess of 65 percent, but that improvements in the plan of operation and updates to the underwriting rules by the wind pool board reduced the rate request to an overall 35 percent.
He said rates will be reviewed every six months as required by the law.
The pool now employs "two-tiered" rating plan to reflect proximity to the coast to ensure that the rates charged reflect the risk of the property.
In addition, minimum deductibles have been upped to three percent in tier one and two percent in tier two, according to the plan.
Underwriting standards have been changed as well, including requiring a national flood insurance policy for those choosing replacement cost coverages, effective Jan. 1, 2008; rating all townhouses as dwellings regardless of the number of units in a structure; and rating condominium associations consisting of only one or two units as "dwelling" not "commercial."
He said the new deductibles and rates should strengthen the pool's operation and reduce the "probable maximum loss" expectations, which should in turn allow the wind pool to get a better reinsurance program.
"It is our feeling that these changes will reduce the risk of any future assessments to both the South Carolina insurance marketplace and consumers," Richardson said.
Won't go away from the water
Survey finds one-third on coast will resist evacuation
According to a new survey of people in high-risk hurricane areas, one-third (31 percent) of residents said if government officials said they had to evacuate due to a major hurricane this season, they would not leave. This is an increase from 2006 when 23 percent said they would not evacuate.
The survey was conducted by the Harvard School of Public Health Project on the Public and Biological Security. It was taken in eight states -- Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Texas -- and only included residents of counties within 20 miles of the coast.
The poll included a special sample of the New Orleans metropolitan area.
Top reasons
The top reasons people give for not evacuating involve issues of safety and security. Three-quarters (75%) say their home is well-built and they would be safe there. Over half (56%) feel that roads would be too crowded, and slightly more than one in three (36%) feels that evacuating would be dangerous. One-third (33%) worry that their possessions would be stolen or damaged while one in four (27%) say they would not evacuate because they do not want to leave their pets.
"Public officials need to be concerned that the further we get from the severe hurricanes of 2005, the less willing people are to evacuate," said Robert J. Blendon, professor of Health Policy and Political Analysis at the Harvard School of Public Health.
"Officials need to remind people that many homes are vulnerable to major storms. They also need to ensure safe evacuation routes are available and the public is aware of them."
These findings are based on interviews conducted June 18 - July 10, 2007 with 5,046 adults in high hurricane risk counties in eight states.
Shelter conditions
If residents of high-risk hurricane areas have to evacuate because of a major hurricane, most would be concerned about the conditions of evacuation shelters if they had to go to one. The biggest worries people have are that shelters would be unsanitary (68%), there wouldn't be enough clean water to drink (66%), the shelter would be too crowded (65%), they would be exposed to sick people (62%), and medical care would be lacking (58%).
Many residents of hurricane-prone areas have not made critical preparations for a major storm. If running water were cut off due to a hurricane, one in four (23%) would run out of clean water after two days, and over half (54%) would run out after six days. If power were shut off, one in 10 (9%) would be without food after two days, and nearly half (44%) after six days.
Communication break down
Hurricane Katrina showed that families can get separated and communication can break down in the aftermath of a major storm, but most residents have not prepared for that possibility. Two in three (66%) have not agreed on a meeting place if their family is separated, and one in two (49%) have not agreed on a phone number outside the region that family members could call. Of those who intend to evacuate and need help to do so (13%), half (50%) do not have that help lined up.
Key information
Past experience with hurricanes has identified some critical information that people should know in order to be prepared for a storm. Many residents of high-risk areas were unaware of some key information. One out of three (34%) do not know if their home is located in an evacuation zone. Thirty-nine percent do not know the location of an evacuation center in their community where they could go if they had to.
A large majority of people would be at risk of eating food that has spoiled due to a loss of refrigeration in a power outage. The USDA recommends that perishable food should not be eaten if refrigeration has been turned off for four hours. Only one in five (20%) knew that perishable food would be safe for just a few hours. One in three (36%) said that food is safe for up to one day, one in four (25%) said two days, and 16% said three or more days. In addition, one in five did not know that each household member requires at least one gallon of clean water per day, the amount recommended by the CDC.
Problems during the past
Nearly one-half (46%) of the respondents in the survey live in communities that were damaged by a hurricane during the past three years. The survey asked them about the problems they had during these hurricanes in order to identify issues that could be prevented in future hurricanes. The most common problem was getting gas to evacuate (35%). Twenty percent reported they did not have enough money at some point, 14% did not have enough water and 12% did not have enough food. Of note, smaller numbers reported needing medical care but not getting it (5%), getting injured (5%) or being threatened by violence (3%). One area where few people reported problems was getting the information they needed to keep themselves and their families safe (8%).
New Orleans
The survey included a sample of the New Orleans metropolitan area to see if residents there differed from other high-risk area residents. After their experiences during Hurricane Katrina, most New Orleans residents say they would evacuate for a future storm. Only 14% would not evacuate compared to 32% of residents of other high-risk areas. Six in 10 (61%) do not know the location of an evacuation shelter if they needed to go to one, which is significantly more than residents of other areas (38%). Despite the dramatic images of people stranded during Katrina, over half (54%) of New Orleans residents are confident they would be rescued if they needed to be during a future storm .
"It is worrisome that New Orleans, the site of one of the most severe hurricanes in U.S. history, has such a large proportion of people who don't know the location of an evacuation center," said Blendon. "An important priority for government and voluntary agencies should be to inform people of the location of shelters well before a storm hits."
Little agreement
Even after Katrina, a substantial percentage of New Orleans residents are not prepared for a major storm. One-half of New Orleans residents (51%) have not agreed on a place for family to meet if they get separated. Thirty-nine percent have not agreed on a phone number outside the region that family members could call. A sizable percentage of New Orleans residents (23%) do not have more than two days of water if the water supply were cut off.
When asked to rate the response of government and voluntary agencies to the problems created by the last major hurricane, 78% percent of New Orleans residents said it was fair or poor compared to 39% of residents of other areas damaged by a hurricane. Only 19% of New Orleans residents said the response was excellent or good compared to 57% in other areas.
Minorities low-income residents
Hurricane Katrina illustrated the additional challenges facing minorities and the poor in these high-risk coastal areas during a major hurricane. This survey finds that although African-Americans (73%) and Latino-Americans (71%) are more likely than whites (59%) to say they would evacuate if government officials said they had to leave in the event of a major hurricane, they are also more likely to need help to do so. Seventeen percent of African-Americans and 10% of Latino-Americans say they need help to evacuate and do not have that help lined up compared to 3% of whites.
Low-income residents also would have more problems evacuating than those who are better off financially. Eighteen percent of those making less than $25,000 a year and who intend to evacuate do not have the necessary help compared to 4% of those making $25,000 a year or more.
If minorities and low-income residents are unable to evacuate because they do not have help, they are less prepared to stay in their homes and weather the storm and its aftermath. Approximately one-third of African-Americans (32%), Latino-Americans (35%) and low-income residents (33%) say they are not prepared if a major hurricane were to strike their community in the next six months. This compares to 14% of whites and 19% of those making $25,000 a year or more. A greater percentage of African-Americans (18%), Latino-Americans (11%) and low-income residents (14%) do not have enough food on hand to last more than three days compared to whites (6%) and those making $25,000 a year or more (8%).
The Harvard School of Public Health Project on the Public and Biological Security is funded by the Centers for Disease Control through a grant to the Association of State and Territorial Health Officials (ASTHO).
N.C. caps some medical malpractice damages
North Carolina lawmakers made a mild breakthrough recently on medical malpractice reform, agreeing to limit monetary damages in certain health care negligence cases.
The bill would cap damages in negligence cases involving a health care provider at $1 million, but only for those who agree to go to binding arbitration. The measure is supported by trial lawyers and the medical society.
The bill was unanimously approved by the House and sent to Gov. Mike Easley, marking a success in the often antagonistic relationship between physicians and trial lawyers. Physicians who support capping damages blame malpractice suits for rising premiums, while trial attorneys argue that patients need financial protection for physicians' mistakes.
The legislation allows plaintiffs and defendants -- such as a doctor, hospital or other health care provider -- to have their case settled by an arbitrator selected by both sides or by the court at the parties' request. All monetary damages would be limited to $1 million. Few appeals would be allowed.
Between 1998 and 2006, an average of 600 medical malpractice lawsuits were filed each year in North Carolina and the median award for cases decided by a jury was slightly more than $300,000, according to the N.C. Academy of Trial Lawyers.
Study: Wind coverage hard to find for Gulf Coast businesses
As a key House committee voted to add wind coverage to the federal flood insurance program over insurers' objections, a new study reported that many businesses along the Gulf of Mexico coast have had a difficult time obtaining wind insurance coverage since Hurricanes Katrina, Rita, and Wilma hit in 2005 and have often ended up paying more than twice as much for the insurance as they did previously.
Gulf Coast businesses are also paying higher wind deductibles while getting lower limits, the study by the nonprofit RAND Corp. found. That means businesses are spending more for less protection from hurricanes, tornadoes and other windstorms.
Because they have been increasingly unable to purchase coverage in the private market, business have often turned to state-run residual insurance markets that provide limited insurance to businesses unable to find insurance elsewhere, according to the study conducted for the RAND Gulf States Policy Institute by the RAND Institute for Civil Justice.
Researchers found that as wind limits have declined and deductibles have increased, while the use of residual markets has risen, wind risk has shifted in part from insurers to policyholders and taxpayers -- including those not living in high-risk areas along the Gulf Coast.
The report says that the scarcity and high cost of wind insurance has delayed some business investments in the Gulf States region since the 2005 hurricanes, but that the overall effect is hard to assess because higher insurance premiums may have in part redirected economic activity to lower risk areas. Half the lenders interviewed for the study said they were aware of delayed or cancelled business projects in 2006 because of high insurance prices or the unavailability of insurance.
"The plight of homeowners after Hurricane Katrina has received most of the attention," said Lloyd Dixon, a RAND researcher and lead author of the study. "But business owners, especially small businesses in the hardest-hit areas, had a difficult time finding wind insurance despite steep price increases, and some couldn't get insurance at any price."
Researchers interviewed commercial policyholders, agents and brokers, insurers and reinsurers, commercial lenders, firms that model wind and other losses, and companies that provide credit ratings for insurers and other firms.
The study found that in the first three quarters of 2006 the cost of insurance for commercial property skyrocketed, and coverage became less available in areas most exposed to wind risk.
One large insurance broker pointed to one client whose premiums increased 80 percent on average from the time Katrina struck in August 2005 to July 2006. And, while coverage limits for overall policies rose slightly, coverage limits for losses caused by wind fell by approximately 30 percent.
"Many firms are bearing more of the risk than they did before the recent hurricanes, so they are less protected against the next big windstorm," Dixon said.
One small business owner in Florida purchased $38 million in property coverage for $250,000 in 2005. In 2006, after his insurer declined to renew his policy, the business owner was able to buy only $5 million in coverage for $940,000 -- a nearly four-fold increase in cost for about one-eighth the coverage.
The study does offer some good news: wind insurance premiums for firms with operations concentrated in hurricane-exposed areas remained flat or showed only modest increases in the first quarter of 2007. Large firms with geographically diverse operations saw price declines, in part because there were fewer storms than expected in 2006.
The study identified several reasons for the large premium increases. For one, insurers' modeling firms increased estimates of the number of hurricanes and damages. Also, financial rating agencies tightened capital adequacy requirements for insurers. In addition, litigation and government actions following the 2005 hurricane season led to uncertainty about how insurance contracts will be enforced by courts. Insurers have also been concerned about potentially large assessments by residual markets.
"While some of the factors that caused price increases may be transitory, the expectation of more frequent hurricanes and higher repair costs will likely prevent wind insurance prices from returning to pre-Katrina levels," Dixon said.
The study advises policymakers not to put blind faith in either the private market or government programs to create a well-functioning insurance system.
In Miss. primary, incumbent Dale faces Katrina, Scruggs and fellow Dems
Hurricane Katrina has nearly knocked the wind out of George Dale's re-election campaign for Mississippi insurance commissioner, a job he's held for 32 years.
Dale is the longest-serving state insurance commissioner in the nation. He's been crisscrossing the state for weeks, trying to win support in what's proven to be his toughest race.
His challenges include a strong opponent in the Aug. 7 Democrat primary and a dispute with Democrats over party loyalty.
But his biggest albatross may be an advertising campaign financed by attorneys who represent policyholders in lawsuits against the insurance industry over rejected Hurricane Katrina claims.
"Had my first election been as different as this one, I never would have run again," Dale said.
"The guy I'm running against is a class act. Gary has run a decent campaign, but I'm actually running to some degree against outside forces," Dale said. "I'm talking Dickie Scruggs and those lawyers. They run cartoons and they've run ads and everything to try to discredit me statewide."
Scruggs is a high-profile attorney who represents hundreds of homeowners in lawsuits against insurers.
As insurance commissioner, it was Dale's job to referee the fallout from Hurricane Katrina. On Aug. 29, 2005, the killer hurricane's storm surge enveloped the Gulf Coast, destroying thousands of homes and businesses.
After property owners scurried to recoup their losses from insurance policies, many of them learned that their coverage didn't include the flooding.
In addition, many of the state's insurance providers raised their premiums. At least one, State Farm Fire and Casualty Co., the state's largest homeowner insurer, suspended writing new homeowner and commercial policies.
Criticism was leveled at Dale, accused by some of favoring the insurance companies in payoff disputes with storm victims and by others of failing to force insurers to hold down their rates.
"Anytime someone does not get their claim paid, they're unhappy and accuse you of being on the side of the insurance company. It's nothing new. That goes on when there's not an election," Dale said.
But then Dale found himself at odds with the Scruggs law firm.
Scruggs has been critical of a mediation program sponsored by Dale's office that allows homeowners to negotiate settlements with their insurers without resorting to litigation. Scruggs has said the program "has no teeth in it."
Months after Scruggs' legal team withdrew support for a January deal that called for State Farm to pay at least $50 million to some 35,000 policyholders, the insurer reached a separate but similar agreement with Dale.
Scruggs Ads
The Scruggs Katrina Group has run a series of television and newspaper ads critical of the insurance industry and unflattering of Dale. Zach Scruggs, the son of Dickie Scruggs and a member of the firm, described the ads as educational.
Still, one newspaper ad depicted Dale as a pig being covered in pink lipstick by State Farm Insurance executives. The caption read: "Lipstick On A Pig."
"George Dale is obviously a big part of the problem on the Gulf Coast, and in Mississippi in general, because he's the one that fills in the amount that every Mississippian has to pay for insurance," Zach Scruggs said. "The fact that it is an election year doesn't change the fact that we have an insurance crisis in Mississippi."
Dale, 66, said many voters don't understand the limitations and the complexities of his job. His duties include regulating the insurance industry, licensing manufacturers and dealers of mobile homes, serving as state fire marshal and chairman of the State Fire Academy.
He said most of his time is now devoted to settling the remaining Katrina claims and ensuring that insurers continue to provide coverage in the state at the lowest possible rates. He said two providers -- Shelter Insurance Co. and Allstate Insurance Co. -- have reduced rates in parts of north Mississippi.
"You can't overlook the fact that this is the largest natural disasters in the history of the U.S.," Dale said, adding that 99 percent of the claims have been settled.
However, Zach Scruggs said the term "settled" could mean closed, but not necessarily paid. Scruggs said many of his clients were lumped into the settled category. So far, he said the firm has won $200 million for 1,200 clients.
Dale, a former high school principal who served as an assistant to then-Gov. Bill Waller, earlier this year faced another controversy over his re-election bid. The state Democratic Executive Committee sought to remove him from the Democratic Party ballot. Committee members argued that Dale shouldn't run under the party label because he publicly supported President Bush in 2004. In May, a judge reversed and put Dale back on the ballot.
Dale's Democratic challenger, Gary Anderson, paints him as being too cozy with the insurance industry. Anderson, who oversaw Mississippi's $10 billion budget as state fiscal officer between 2000 and 2003, points to campaign contributions Dale has received.
"It's a pocketbook race. How can you look out for the consumers when you're in the back pocket of the insurance company?" asked Anderson, who has said he would not accept any contributions from the industry.
Dale has more than twice the amount of campaign cash-on-hand as Anderson, and he defended contributions from local insurance agents, saying they want to elect someone who will fairly regulate them.
If Dale is successful in the primary, he still faces a Republican in November.
The Republicans running for insurance commissioner are state Sen. Mike Chaney of Vicksburg and Ronnie D. English of Vancleave.
The Hartford settlement ends agents' contingent commissions
The Hartford Financial Services Group Inc. announced it has reached a settlement with the New York, Connecticut and Illinois attorneys general resolving matters relating to their investigations of the compensation arrangements between the insurer and its property/casualty agents and brokers.
As part of the deal, The Hartford will no longer pay its property/casualty insurance agents commissions that are contingent upon growth or future performance but will implement a new supplemental payment scheme with fixed commissions per policy based more on an agency's past performance with the insurer.
In this change in compensation plans, the insurer joins others including Chubb and Travelers in instituting fixed commission plans for agents.
The company also reported a settlement regarding the New York Attorney General's investigation of market timing within the company's variable annuity products.
In settling both the market timing and broker compensation matters, The Hartford said it has agreed to pay, in total, $115 million.
The Hartford did not admit or deny any violation of federal or state law as a result of this settlement.
Other previously disclosed matters that were under investigation by these attorneys general have been concluded, according to the insurer.
In addition, The Hartford had previously disclosed an investigation by the staff of the Securities and Exchange Commission into matters related to market timing. In light of the settlement, the company said that the SEC staff informed The Hartford that it has concluded its investigation without recommending any enforcement action.
The $115 million total amount consists of $89 million in restitution ($84 million for market timing and $5 million for broker compensation) and $26 million in penalties.
According to the insurer, a "substantial portion" of the cost of the settlement has already been funded by a previously disclosed reserve of $83 million set aside for regulatory matters.
"We are pleased to have these matters behind us," commented The Hartford Chairman and CEO Ramani Ayer. "Since these investigations began more than three years ago, we have cooperated fully with the attorneys general and other regulators. We have worked assiduously to strengthen and improve our business practices and will continue to do so. We emerge from this period with an unwavering resolve to uphold our longstanding commitment to providing our customers with outstanding products and exemplary service."
Of the total settlement amount, $5 million will be paid into a fund to compensate certain commercial property/casualty policyholders "related to a limited number of isolated instances of improper quoting between 2001 and 2004."
The attorneys general found that in these instances, certain employees of The Hartford engaged in improper underwriting by providing quotes for commercial insurance that were not based on an adequate assessment of the risk. The company said these activities were not in keeping with its standards and that over the last several years, the company has voluntarily strengthened its internal controls, guidelines and training in this area.
The Hartford also agreed that it will forego paying contingent compensation in any line of its property/casualty business in which more than 65 percent of the U.S. market does not pay contingent compensation.
The Hartford said it has decided to implement a new program for 2008 to compensate property/casualty agents and brokers for their performance in these lines of insurance and in its other standard commercial lines of insurance. Under this new supplemental commission program, The Hartford will pay a fixed commission, set prior to the sale of a particular insurance policy, that is based among other things on the agent or broker's past performance.
"We value our strong partnerships with independent agents and brokers," said Ayer. "Our new property/casualty supplemental commission program reflects their feedback for a more predictable compensation package."
In addition to the property/casualty fund monies, $84 million of the settlement will be paid into a fund to compensate certain variable annuity contract holders of The Hartford for harm the New York Attorney General found to have resulted from the market timing activities of variable annuity contract holders from 1998 through 2003.
House panel votes to add wind to flood program
Private insurance companies are balking at a decision by a key House panel to expand the federal flood insurance program to include wind coverage. The House Financial Services Committee voted late last month to add wind coverage to the National Flood Insurance Program (NFIP).
"We continue to believe that adding wind coverage to the NFIP is not the right solution," commented American Insurance Association (AIA) President Marc Racicot.
AIA commissioned a study by Towers Perrin showing that adding wind could cost taxpayers as much as $100 billion to $200 billion if the federal government began displacing the private market by providing wind coverage.
At a recent hearing, AIA was joined by other insurer groups in opposing the expansion. They included the Property Casualty Insurers of America and the Reinsurance Association of America.
PCI told lawmakers that, while the inclusion of wind coverage within the federal program is well-intentioned, it may produce unintended negative consequences for millions of American insurance consumers.
"Including wind coverage within the NFIP will create artificial subsidies, thereby essentially raising rates for consumers in inland parts of the country who are not subject to the same kind of wind-damage risks faced by policyholders on the coasts," said Ben McKay, PCI's senior vice president, federal government affairs. "It is hard to believe that Congress wants to give more responsibility to a failed government program. I wouldn't invest in a company that had inadequate cash flow and $17.5 billion of debt."
According to PCI, the combination of homeowners insurance coverage, state wind pools and flood coverage available through the NFIP already provide consumers protection from wind and water damage. Moreover, the current system provides consumers the opportunity to purchase coverage at a price that reflects the risk based on the location of the property and the likelihood of a loss.
"State residual market mechanisms provide wind coverage where there is no market, and private insurers provide wind coverage where there is a market," McKay said. "The Taylor bill simply creates a federal government fund that will compete with existing state funds and potentially with the private sector."
Franklin W. Nutter, president of the Reinsurance Association of America (RAA), also argued that the expansion provision was unnecessary because private sector insurers, reinsurers, capital market participants, and residual market programs already provide wind coverage.
In a letter sent to Chairman Barney Frank, D-Mass., and Ranking Member Spencer Bachus, R-Ala., of the House Financial Services Committee, Nutter said that it "fundamentally alters who bears the risk of loss from wind. Instead of spreading this risk throughout the private worldwide insurance marketplace, this legislation puts the entire burden of deficits on the U.S. taxpayer. This fundamental shift is not needed."
Insurers had hoped lawmakers would have instead pursued a proposed six-month study by the Government Accountability Office, which they said would have provided an analysis of adding wind coverage to the NFIP and provided a better understanding of the real cost of adding wind.
The measure approved by the House Financial Services Committee is H.R. 3121, the "Flood Insurance Reform and Modernization Act of 2007," which also includes other reforms to the NFIP that insurers support
Sandy Praeger, president-elect of the National Association of Insurance Commissioners (NAIC) and Kansas Insurance Commissioner, testified earlier in July before the Subcommittee on Housing and Community Opportunity on the merits of all-perils insurance coverage.
The NAIC stated that it believes adding wind coverage to the NFIP would help resolve potential conflicts between consumers and insurers regarding the cause of damage to their homes during a hurricane, but would also move the line of contention to other perils, such as fire or earthquake damage.
Praeger suggested that instead the NFIP could be restructured to function as a reinsurer. Alternatively, the private market could offer all-perils coverage and be supported by a federal backstop or credit line that would cap the industry's share of such catastrophic losses.
Agents say 'no' or nothing to adding wind coverage in flood program
Some independent insurance agents are taking a "neutral" position when it comes to adding in wind coverage in the National Flood Insurance Program (NFIP). Still others say "no" to wind entirely.
Patrick Royal of the Independent Insurance Agents and Brokers of America says his association remains "neutral," neither supporting nor opposing adding wind coverage to the flood program.
But the Professional Insurance Agents agents seem to be pleased that H.R. 3121, the "Flood Insurance Reform and Modernization Act of 2007" is moving forward, but disagree on some of the "language" in the bill.
"PIA is pleased the flood proposal is moving forward," said Patricia A. Borowski, PIA senior vice president. "However, we continue to be disappointed by and oppose the House's inclusion of Rep. (Gene) Taylor's language attaching a multi-peril (wind) coverage."
Borowski said that if the NFIP added wind coverage to policies, in essence those policies would have to become comprehensive property policies.
"PIA understands, appreciates and agrees with the challenge that Rep. Taylor is trying to resolve for constituents, that is to be sure that people have coverage that will respond no matter whether the damage is from flood or wind or water surge, etc.," she said. "However, the specific approach Rep. Taylor has selected and now is in the House version is highly defective and will not resolve the fundamental problem. It just adds more cost for insurance coverage for consumers and increases the number of parties and coverage forms that could be drawn into a claims coverage controversy."
Borowski said the challenge with adding wind to flood policies is that most states do not exclude wind from private property policies.
"So, now you have a problem with a person with a flood policy with wind coverage, and a property policy with wind coverage," she noted. And when there's a flood "who pays?" she asked. "Whose limits pay? Who's in control? Who makes the decisions?"
While Borowski added that PIA "absolutely understands Mr. Taylor's position" this concern has to be worked out in a different way.
"Imposing wind in the NFIP truly is not a solution," she said. "If this goes through we might be here three years later and have the same loss circumstance and those people who will have a flood policy with wind coverage, a property policy and a wind policy, will still be left short."
Borowski added that the PIA is currently working with the Senate "to fix this problem aspect of the bill."
