With one glaring gaffe, U.S. Senator Hillary Rodham Clintoninadvertently exposed one of the biggest problems facing theNational Flood Insurance Programthe fact that too few outside theindustry have a clue about what the coverage entails, whether theyneed it, or even who writes it.

In a July 1 letter, the New York Democrat called on Allstates chiefexecutive to reconsider and explain what was referred to in herpress release as the companys irresponsible decision to drop theflood insurance policies of 30,000 homeowners who reside in NewYork's coastal counties.

Of course, Allstate is doing no such thing, since flood risksare left to the federal government, which offers supplementalcoverage to homeowners through servicing insurers and agents.

A staffer later insisted the senator actually meant to addressAllstates decision to cut its homeowners insurance exposure byred-lighting any new coverage in New York City, Long Island andWestchester County, while declining to renew an unspecified numberof existing policies.

"I found the news of these cancellations very troubling,especially in light of the recent floods that have ravaged New YorkState," Sen. Clinton wrote to Allstate CEO Ed Liddy. She demanded athorough explanation that details Allstate's reasons for thesecancellations, one that also includes an assessment as to whyalternative coverage is not being made available so that thisdrastic step can be avoided.

The letter betrays so much ignorance about whats going on, itshard to know where to begin to set Sen. Clinton straight.

I think it was more than a typo that she mistakenly connectedNew Yorks flood damage to Allstates moveit shows she doesntunderstand that standard homeowners coverage has nothing to do withsuch exposures. Our own lawmakers, let alone average policyholders,often dont get the difference.

To wonder why alternative coverage is not being made availableis bogus, since it is up to the market to pick up prospectsrejected and customers abandoned by the Good Hands carrier. Thusfar, it appears the market is doing just that, as competinginsurers boost their writings.

As to why Allstate is taking these steps, its no secret thecarrier had built up a dangerously high market concentration. Tomaintain their exposure while weather experts warn them about ahurricane hitting New York would be irresponsible. Backing off abit is long overdue. The goal is to better spread the riskthesecret of success for insurers.

If Sen. Clinton really wants to help her constituents getadequate coverage, she should lead the charge to educate the publicabout the need for flood insurance, more aggressively market it andmake sure lenders require its purchase. She should push to raisecoverage limits that are clearly inadequate in this booming realestate market and make sure sufficient rates are charged to matcheach individuals risk.

She might even suggest including flood coverage in all standardhomeowners policiesor at least those sold in clearly vulnerableareaswith appropriate premiums collected by insurers and paid intoa disaster pool. Earthquake coverage in fault-prone regions couldbe financed the same way.

Unfortunately, I fear this is a hopeless cause. I doubt Congresswill ever get its act together and actually do something productiveabout disaster insurance. That would mean the federal governmentwould finally have to get serious about catastrophe management. Itsmuch easier to demonize insurers, then bully or sue them intocovering what their policies clearly exclude.