The Independent Insurance Agents & Brokers of America (the Big “I”) says the debate over windstorm coverage is crucial for consumers and independent agents and brokers in many regions throughout the country.
However, the group stopped short of endorsing a proposal to add windstorm coverage to the federal flood insurance program, promising to study the impact of such a change.
At the same time, insurance companies came out against the proposal, warning against what they said could be unintended consequences including higher costs for consumers outside of windstorm areas.
Rep. Gene Taylor, D. Miss., has introduced the Multiple Peril Insurance Act, which would offer windstorm coverage as an option for consumers within the National Flood Insurance Program (NFIP). 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 $1,000,000 for structure and $750,000 for contents and business interruption. This coverage would only be available where the local government has adopted standards designed to reduce windstorm damage.
The Big “I” commended Rep. Taylor for his work on this issue and said it is examining the impact this proposal may have on both consumers and the private market.
“We are pleased that members are offering ideas to address natural disaster insurance issues and we appreciate Rep. Taylor’s efforts to try and simplify wind vs. water coverage for consumers and to ensure insurance is available and affordable for consumers,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations. “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.”
“The availability and affordability of windstorm coverage is a serious issue affecting consumers and independent agents in many areas of the country,” says John Prible, Big “I” assistant vice president for federal government affairs. “It is important that Congress explore all options to solve the problem, but in doing so it is imperative that any government solution not unduly infringe on the private market.”
The Property Casualty Insurers Association of America (PCI) said that while it believes the Multiple Peril Insurance Act is well-intentioned, it is concerned that the bill may produce unintended negative consequences for millions of American insurance consumers.
“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, PCI’s senior vice president, federal government affairs. “Any efficiencies that might be gained by a multi-perils policy would come at a cost to many consumers. We believe that this is both unfair and unnecessary.”
According to PCI, the combination of homeowners insurance coverage and flood coverage available through the National Flood Insurance Program already provide consumers “effective and efficient protection from wind and water damage.” Moreover, the current system provides consumers the opportunity to purchase coverage at a price that reflects the risk based on the location of the property and the likelihood of a loss, the group maintained.
“Certainly, the NFIP needs improvements to better respond to consumer needs for higher quality coverage, and we have been urging Congress to enact these reforms for years,” said McKay. “However, we do not believe that a one-size-fits-all program which fails to address risk variations in different parts of the country is needed or desirable, especially when considering that programs are already in place to deal with wind and water damage effectively.”
The association reiterated its support for private market initiatives, stronger building codes and land use regulations, backed up, where needed, by state catastrophe funds and limited, high-level federal financial support for responsibly managed state funds.
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