Congressman Hits Insurers On Wind vs. Flood

National Underwriter News
June 28, 2006
Posted July 10, 2006

WASHINGTON -- An insurance trade group representative came under fire during a congressional hearing on the catastrophe insurance market yesterday over his industry's handling of hurricane damage claims.

And a consumer organization also experienced antagonism from a lawmaker over its stance opposing a public catastrophe fund.

The action came during a hearing by the House Financial Services Subcommittee on Housing, which examined the homeowners insurance market and the insurance industry's response to major catastrophes.

Perhaps the most vocal critic of insurers was Rep. Gene Taylor, D-Miss., whose questioning of insurer trade group representatives was particularly sharp for American Insurance Association President Marc Racicot.

Mr. Taylor, who is suing his home insurer over hurricane damage, voiced a concern that carriers are forcing the government to pay for claims in the Gulf Coast region by improperly classifying homes wrecked by winds as having sustained flood damage not covered by policies.

On Tuesday during debate on a measure to reform the Flood Insurance Program, Rep. Taylor had noted that former Senate Majority Leader Trent Lott, R-Miss., and Federal Judge Lou Guirola are suing carriers on the wind versus flood issue despite what he noted has been their consistent support for restrictions on litigation.

"When a former United States senator and majority leader, a federal judge and a sitting congressman feel they have to go to court to get justice, the problem is not with the individual -- it's with your industry," he told Mr. Racicot.

Mr. Racicot responded that the industry is heavily regulated, and that all of the policies and flood exclusion language Rep. Taylor and others are disputing was approved by the state's insurance commissioner.

Mr. Racicot also said that the legitimacy of American business rests on the sanctity of the contract language that should apply to all people, regardless of their stature. "Whether you're a congressman or a painter, it doesn't matter," he said.

Rep. Debbie Wasserman-Schultz, D-Fla., took issue with Consumer Federation of America Legislative Director Travis Plunkett over his group's opposition to legislation proposed by Rep. Ginny Brown-Waite, R-Fla., establishing a national catastrophe pool.

Rep. Wasserman-Schultz, a self-described ally of the Consumer Federation, said after Hurricane Andrew in 1992 a catastrophe pool had proved invaluable in saving the state's homeowners' insurance market.

Mr. Plunkett said the Consumer Federation believes the national pool would place an unfair burden on consumers, either as taxpayers or policyholders. Rep. Wasserman-Schultz questioned that thinking, asking, "You don't think the consumers are on the hook now?"

Ernie Csiszar, president and chief executive officer of the Property and Casualty insurers Association of America, offered a slightly different proposal than Rep. Brown-Waite, but one that shared the concept of a state/federal approach.

"We recognize the value of the state catastrophe fund," Mr. Csiszar said, but he also said the federal government can and should have a role to ensure added security in the wake of a major catastrophe.

Under his group's proposal, a federal credit would be made available to states that have established catastrophe funds to serve as a backstop after a major event. That credit, Mr. Csiszar said, would then be repaid by the state over time.

Copyright © 2006 by The National Underwriter Company

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