U.S. House OKs adding wind to flood insurance program

Friday, 05 October 2007

By Molly Parker The U.S. House of Representatives on Thursday passed a controversial proposal to expand the National Flood Insurance Program to include wind damage, even as the insurance industry cautioned against further government meddling in the private industry. House Majority Whip James Clyburn, D-S.C., said in a statement it is “legislation designed to hold insurance companies more accountable and prevent the denials of coverage that so many (Hurricane) Katrina and Rita survivors were rightfully entitled (to).” Clyburn spokeswoman Kristie Greco said the legislation was prompted by the fact that insurers refused to pay on claims after Hurricane Katrina and other major storms and maintained the damage was the result of flooding and therefore the federal government’s domain, even when wind was clearly the cause of significant damage, for which they would be liable. “For a region like Charleston, it could mean a lot in terms of regulating the industry and protecting homeowners,” Greco said. Kathy McKay, chairman-elect of the Independent Insurance Agents and Brokers of South Carolina, said the viability of such a program depends on the details, but that she is concerned about efforts to include wind damage in the federal flood program. Clients don’t always realize the restrictive nature of the National Flood Insurance Program until they go to place a claim after a storm, she said, noting they usually end up disappointed to find that the federal program will not reimburse them enough to repair the damage. The White House said in a statement it would veto the change because it would encourage more people to build in vulnerable coastal cities, and some inland lawmakers argued it was unfair for the rest of the country to subsidize beach dwellers who should know the risk when they move in. Though some insurers dropped wind coverage altogether after Katrina, McKay said it is still readily available in the Charleston-region, albeit expensive. South Carolina already has a program similar to the federal proposal called the South Carolina Wind and Hail Underwriting Association. It had been historically only available to homeowners living on the beach, but was extended this summer to include vulnerable inland areas, including portions of James Island, Johns Island, Edisto Island, Wadmalaw Island and the city of Charleston, though the peninsula was excluded. Legislation passed by the General Assembly and signed by Gov. Mark Sanford in June provided the ability for homeowners to set up tax-free catastrophe savings accounts and created a tax writeoff for weather- and wind-related improvements made to homes. The legislation also extended the coverage area for the state’s wind insurance program, though as a result premiums are expected to go up as much as 35% starting Monday, McKay said, noting homeowners on the beach will see the largest increases. The federal legislation passed 263-146, and is one of a number of bills floating around the Democratically controlled Congress, which has promised to right many of the perceived wrongs in both the government and insurance response to Katrina. Clyburn, who is also chair of the House Democratic Caucus Taskforce on Hurricane Katrina, added in his statement that the provisions “fall short of being as comprehensive as the Democratic leadership would like.” But, he said, “We will use this bill as a building block in promoting future initiatives.”