Winds of change
The lack of markets and affordable windstorm coverage for both homeowners and businesses has reached crisis proportions in some states. Hopefully this legislation will spark serious policy debate in Congress on this important topic.”
Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations for the Independent Insurance Agents and Brokers of America (the Big “I”), is talking about a controversial bill introduced by Rep. Gene Taylor, D. Miss. Taylor’s Multiple Peril Insurance Act would offer windstorm coverage as an option for consumers within the National Flood Insurance Program.
The bill would set windstorm residential policy limits at $500,000 for the structure and $150,000 for contents and loss of use. Nonresidential properties could be covered to $1 million for structure and $750,000 for contents and business interruption.
The proposed federal windstorm coverage would only be available where the local government has adopted standards designed to reduce windstorm damage.
The Big “I” is not endorsing the Taylor bill — it says the idea needs further study — but the association is welcoming the debate over windstorm coverage since it affects so many consumers and independent agents and brokers throughout the country.
Insurance companies, meanwhile, have already come out against the Taylor proposal, warning that while it may be well-intentioned, it could also trigger unintended consequences including higher costs for consumers outside of windstorm areas.
“The chief problem presented by this legislation is that it will create artificial subsidies, 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 consumers on the coasts,” said Ben McKay, Property Casualty Insurers Association of America, senior vice president, federal government affairs.
The issues of how to deal with catastrophes and whether there should be an expanded role for the federal government are legitimate ones for Washington politicians and lobbyists to debate. But this is a debate that shouldn’t be left to Washington insiders.
The good news is that states are getting involved. The National Association of Insurance Commissioners (NAIC) Catastrophe Insurance Working Group recently agreed to evaluate modeling for multi-state funding of catastrophes such as hurricanes or earthquakes. The group will evaluate the modeling of a multi-state fund for a single peril such as a hurricane or earthquake in order to capture the geographic and temporal advantages of pooling multi-state risk. The group also agreed to explore the use of an interstate compact as a vehicle for a multi-state catastrophe funding mechanism.
“A multi-state catastrophe fund will allow states to pool their risks and resources in a tax-advantaged fund to help ensure for consumers the availability, accessibility and affordability of insurance involving a range of natural catastrophes,” said Florida Insurance Commissioner Kevin McCarty, chair of the working group.
According to McCarty, states are making “significant inroads in identifying the many facets of this complex issue” and are proceeding to develop the scope and structure of a multi-state fund. Their progress should be applauded and encouraged.