(Dem. Rep) Taylor, Insurers Lock Horns Over (Insurance Reform) Bill

[Rage for Order]

Source: Sun Herald

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.

Taylor says that insurers overcharged the NFIP (National Flood Insurance Program) 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.

"The proposal's actuarially sound rates still do not address the lack of flood coverage penetration," said Hartwig (president of the Insurance Information Institute). "It's not what will happen to the private sector, but what will happen to citizens and their taxpayer money."


Read more: http://www.sunherald.com/278/story/100408.html

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Apparently the Insurance Information Institute doesn't want this bill to pass because they are concerned about "...what will happen to citizens and their taxpayer money." I'm so thankful that the III is trying to ensure that my tax dollars are being spent wisely! :sarcasm:

[Rage for Order]

1. More from the article...

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.

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.

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.


edited to remove duplication
Still more at the link

[Mojorabbit]

2. I was just reading a different article on this

http://www.palmbeachpost.com/storm/content/nation/epaper/2007/07/17/a8a_catastrophe_0717.html
snip
The private insurance market is split with some major companies such as State Farm and Allstate taking the position that a federal fund is needed because certain natural disasters will be simply too large for the private insurance market, even when backed by state catastrophe funds.

Private insurance debate

Other private insurers are more skeptical of federal involvement.

"Some of this stuff, to some extent, kind of replicates what is going on in the private market right now," said Eric Goldberg, assistant general counsel for the American Insurance Association, an industry trade group.

Coupled with private global reinsurance coverage - the insurance purchased by private insurance companies to cap their risk - Goldberg said the private insurance market has the capacity to provide adequate insurance coverage.

"If the question is that policy makers think that insurance customers are paying too much, that's more of a social issue than an insurance issue," Goldberg said.

He acknowledged the federal government probably could sell reinsurance and catastrophe bonds cheaper than the private market, but said it "could also go into the plywood business and sell plywood cheaper than Home Depot."

Mahoney said there is a difference between an industry that has the ability to pay claims nationwide and one that makes coverage virtually unavailable or unaffordable in disaster-prone areas.

"The problem we're having in Florida is availability and affordability," Mahoney said. "It's the ability of somebody to be able to pay for their insurance; it's not whether or not the insurance companies have the ability to pay the claims."

Mahoney added, "We have a broken market. Why?

[Rage for Order]

3. Insurance companies are not non-profit entities

As a result, they will do everything in their power to pay as little as possible or flat out deny a claim following a major catastrophe. Take the profit incentive out of the insurance pool and rates will go down. I'd rather my insurance company be be more concerned with giving me the assistance I need to begin rebuilding my life than looking for ways to deny or minimize my claim in order to fatten their bottom line.

[Mojorabbit]

4. It seems though

that to bribe them to stay in Fl the state took on a lot of the risk of covering the insurers after a certain amt. The premiums have skyrocketed all over the state. Meanwhile they post record profits.

[prismpalette]

5. hurricane coverage for flooding

..being a reader who lives in the hurricane insurance area...homeowners must start accepting the risk when building or living on the coasts. If you can afford 100's of thousands for a home there, you can afford the exorbitant premiums for insurance protection. Why should taxpayers in Montana be forced to assume the risks for those living in second and third homes on our beautiful beaches? Granted, insurance companies will use any loophole to not pay in any type of calamity or disaster befalling a homeowner anywhere. But crying foul in hurricane insurance areas is misleading to those living elsewhere.

[Mojorabbit]

6. Yes but I live

in central fl, not on the coast and my premiums went through the roof. No place is safe from natural disasters, ie earthquakes, flooding, tornados.