WASHINGTON–An influential Democratic Senator announced his support yesterday for a bill passed by the House expanding the National Flood Insurance Program to cover windstorm damage.

Sen. Charles Schumer, D-N.Y., made his comments at a hearing by the Senate Banking Committee, which he is a member of, as the panel met to examine the problems currently facing the debt-ridden NFIP.

The senator in his remarks sharply criticized the insurance industry for non-renewing coverage for homes on Long Island while at the same time arguing that the federal government should not be involved in the wind coverage market.

“The private insurance industry says, 'No, no, no. Let us cover wind.' And they leave areas like Long Island,” he said. “Gentlemen, ladies, you can't have it both ways. You want to exempt yourself from large parts of America, certainly New York, then don't lobby against the federal government coming in and doing it.”

Sen. Schumer also questioned aspects of the current NFIP, particularly the coverage limit of $250,000. Such a limit, he said, would cover the costs of replacing a home in many parts of the country, but “doesn't make sense for New York,” falling far short of the value of many homes on Long Island.

The House program, originally authored by Rep. Gene Taylor, D-Miss., was passed as part of a larger flood insurance reform package and would allow homeowners who have already purchased flood coverage to purchase coverage for wind damage from the program as well.

Other members of the Senate committee offered other proposals to help ease the burden on the NFIP. Sen. Jim Bunning, R-Ky., called for the elimination of subsidized rates for secondary homes and rental properties, noting that “many of the subsidized homeowners don't even need the help.”

J. Robert Hunter, director of insurance for the Consumer Federation of America, agreed that subsidies need to be eliminated, arguing that “if we don't do it now, some people will be here in 30 years having the same discussion.”

Sen. Bunning also questioned whether insurers were taking advantage of the program, noting some estimates that as much as two-thirds of the premium for flood coverage are paid to the write-your-own insurers, who are supposed to receive only enough to cover administration expenses.

The ranking minority member of the committee, Sen. Richard Shelby, R-Ala., also wondered if insurers were abusing the program.

“When this partnership was created, the program was supposed to reimburse expenses for the Write Your Own carriers,” he said. “Profit was not supposed to be part of the agreement. Initial indications are that many companies are not only profiting from this arrangement, property and casualty insurance companies have been created solely for the purpose of administering this program. In other words, it is their only business.”

Defending the NFIP, David Maurstad, assistant administrator and federal insurance administrator of the Mitigation Division for the Federal Emergency Management Agency, said that the two-thirds figure needed to be put in context.

Roughly one third of the administrative cost, he said, goes to the agent selling the coverage. Additionally, he said that the costs of administering claims tends to increase when the number of claims increases, and that the NFIP would work to bring down that figure.

“We're going to make the correction in that area,” he said.

Another concern for the panel was strengthening the mandatory purchase requirements for homeowners.

When asked about the mandatory purchase requirement, Mr. Maurstad argued that it is the responsibility of lenders to enforce the requirement.

Witnesses appearing before the committee on behalf of the insurance groups offered their own proposals for strengthening the program, including rewriting the policies to be more in line with other homeowners insurance lines, and by improving flood maps to better inform homeowners of their risk.

“The flood maps are outdated, and oftentimes it is difficult to locate the property on the Flood Insurance Rate Map,” said Don Griffin, vice president of personal lines for the Property Casualty Insurers Association. “We believe that reform legislation should provide additional federal funds to expedite completion of the map modernization initiative.”

This article was updated Oct.16, 11:16 a.m.

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