The Property Casualty Insurers Association of America has issued a bulletin pointing to a weekend of destructive storms in the Midwest, as proof of the “need for an immediate reauthorization of the National Flood Insurance Program (NFIP).”
The storms and heavy rains left thousands of homes across the Midwest flooded and without electrical power, including about 94,000 customers in Michigan. In some Chicago suburbs such as Gurnee and Des Plaines, residents were piling sandbags in an attempt to prevent the Des Plaines River from flooding their homes and businesses, which may be evacuated if the river overflows.
“This is yet another example of the kind of destruction and devastating circumstances from which the NFIP can help consumers recover,” stated Carl Parks, PCI Sr. VP – federal government relations. ” Without the NFIP, flood insurance would be either unavailable or unaffordable, and victims of events such as this would be left with no way to recuperate from the crippling financial losses that result from flooding,”
The PCI noted that the NFIP is set to expire on June 30, 2004, just 30 days after the official start of hurricane season. The association said the “Insurance Industry supports an immediate reauthorization of the NFIP, and stresses the importance of not creating a time gap by letting the program expire even temporarily, as this would cause considerable disruption and expense for both policyholders and the insurance industry.
“The federal government began offering flood insurance through the NFIP, in partnership with the insurance industry, because it recognized that the private sector lacked the resources to identify all flood-hazard areas, and was thus unable to measure potential loss. A federal program is vital for the availability of flood insurance.”
Parks explained that “insurers operate by distributing loss among their policyholders, thus making coverage affordable for all. In the case of flooding, however, because the damage is at once both so catastrophic and regionally predictable, insurers cannot adequately spread the risk over all their policyholders or absorb the losses when they occur. The NFIP solves this problem by spreading the risk over the entire country, so that flood insurance premiums can be low enough to be affordable for consumers.”
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