In Pascagoula, Miss., on the Gulf Coast, agent Laverne Nelson has to get windstorm coverage for her personal property from the state wind pool.
That is because in April her property insurer, MetLife, dropped her wind coverage. Before that, she says the cost of her coverage had doubled over the past few years.
Nelson, of McIlwain-Wells and Nelson Insurance, is just one of many residents in the towns devastated by Hurricane Katrina who continue to struggle with the price and availability of property insurance.
“The cost of insurance around here is astronomical,” Nelson says.
For the past three years, Rep. Gene Taylor (D-Miss.) has tried to help the people like Nelson who live in the regions devastated by hurricanes Wilma, Katrina, and Rita, with a proposed law that would add wind-damage coverage to the flood protection afforded by the National Flood Insurance Program (NFIP).
But most now say his proposal is not a good idea and is not going to happen.
Taylor first put forth a bill to add wind coverage to the NFIP in 2007. But, it never made it out of congressional committee. So, in 2009, he introduced his present bill, H.R. 1264, the Multiple Peril Insurance Act.
The bill stems from Taylor’s personal experience after Katrina. His own house in Bay St. Louis, Miss., was leveled by the hurricane, and he says he watched as he and many of his neighbors had their insurance claims denied and deferred for a long time in disputes over whether the damage their properties sustained were caused by wind or water.
Taylor maintains insurance companies simply did not want to pay claims, so, where there was any flooding or storm surge, they denied that damage was caused by wind and shuffled responsibility off onto the NFIP insurance. His bill is intended to prevent such disputes in the future. It would also make affordable wind insurance available in coastal areas where it is not now.
Taylor’s H.R. 1264 was scheduled to be introduced onto the floor of Congress for a vote late last month. However, at the last minute it was pulled back. Observers have said they suspect the House party leadership pulled the bill because they knew it would fail the vote.
Opposition to the bill has been widespread and intense. The Property and Casualty Insurers Association of America (PCIAA) opposed the bill because it would take away what is now a private business, without any guarantee that the government action would bring the cost down. The legislation does call for the premium rates to be actuarially sound. The Association said over 47,000 private jobs, equivalent to $26 billion in wages, would be lost to Washington if the measure was adopted.
“We appreciate Rep. Taylor’s attempt to help his constituents, but we really don’t believe that his bill is the appropriate solution,” said Don Griffin, a vice president with PCIAA.
The Association has also noted that the NFIP is struggling right now, with a debt of about $19 billion it may not be able to repay, and so, the Association argued, now may not be the time to increase the Program’s responsibility.
The Obama Administration came out with a statement against the bill. It reiterated the objections of the insurance industry, and said: “Expanding the NFIP to cover windstorm insurance would unnecessarily duplicate available insurance products and could ‘crowd out’ such products when they are offered, while offering little savings to the American public.”
The U.S. Chamber of Commerce came out with a public statement opposing the bill, saying the bill would not be fair because the public has always had to subsidize the NFIP and it was not fair to ask the residents of Iowa to subsidize further the people who choose to live on the coast.
The NFIP has come in for criticism lately after analysis of claims data has shown that the program pays for many properties over and over again because they flood repeatedly. A USA Today investigation said that the number of repeated-loss homes in the NFIP has doubled in the past 15 years.
Even environmental groups, such as the World Wildlife Fund and the Sierra Club have lobbied against the bill, saying it would encourage more development in sensitive coastal areas.
While H.R. 1264 could be reintroduced, most consider that unlikely because this congressional session has only a few weeks left, and many more pressing problems to address, including consideration of extending the Bush tax cuts and passing a reauthorization of the NFIP, which is set to expire September 30.
Taylor and his staff are highly frustrated. One week ago, Taylor laid into the insurance industry in comments to the Biloxi Herald, saying that the insurance industry had “broken out all the stops” to oppose his bill. “They can hire a lot of lobbyists and dump a lot of money into campaigns,” he said.
“It will, unfortunately, probably take a major East Coast hurricane, with some other people suffering as we suffered, for us to pass insurance reform,” he also said.
Brian Martin, a staff person in Taylor’s office, told the Insurance Journal that the bill and the situation in Mississippi had continually been “misrepresented” by critics.
He said that building safety design in vulnerable areas was improving, but insurance still was not available, statements to the contrary notwithstanding.
“There are a few companies still writing on the coast, but they are cherry picking the low-risk, well-built properties,” Martin said.
The state wind pools on the Gulf have picked up some of the slack, but that is not the answer. The wind pool in Mississippi now has $6 billion in exposure, which is much more than it can cover.
“Any major hurricane hits any one of these states . . . the wind pools are insolvent,” Martin said.
In the meantime, Sen. Roger Wicker (R-Miss.), recently proposed an insurance bill. His bill does not address the availability problem, but it does attempt to mitigate the wind versus water claim disputes.
The bill would require that, when there was a claim made after a hurricane with wind and water damage, the wind insurer and the flood insurer each pay out 50 percent of the claims immediately. The customer, therefore, would get paid right away, and could start putting their life back together. Then, the insurers would negotiate out their respective responsibilities before an arbitration panel.
But it is not clear that Wicker’s bill has any better chance of passing than Taylor’s, give that so little time is left in the Congress.
Martin said that Taylor does not necessarily oppose Wicker’s bill, but noted that the bill does not address the central issue of availability.
“I don’t know that there is any more chance of their’s passing than of our’s passing,” he said. “The insurance industry does not want that either.”
Griffin agreed that the industry probably is not favorably disposed to the Wicker proposal, though he said they have not studied it well yet. He says the industry’s objection is that the arbitration panel that would decide who pays for what would be run by the Federal Emergency Management Agency (FEMA), and their officials do not have expertise in wind damage.
All of which leaves many Gulf residents angry and unsatisfied as they brace themselves for the next, inevitable storm.
Said Connie Moran, the mayor of Ocean Springs, Miss., when she was asked if the insurance situation was improving in any significant way: “Nothing has changed since Katrina.”