Hurray For Hunter!

Most industry associations danced on tip-toes around this political minefield, careful not to appear insensitive to the plight of those whose flood-related losses were not insured by private carriers. However, at least one group–the Property Casualty Insurers Association of America–was brave enough to be naysayers.

Allowing the retroactive purchase of federal coverage "would do a disservice" to the National Flood Insurance Program "by creating a disincentive for the future purchase of flood insurance," said Scott Duncan of PCI. While PCI "looks forward to working with Congress for ways to improve the NFIP," he said, "retroactive coverage is an ineffective mechanism for the delivery of badly needed relief."

In agreement, amazingly, was Mr. Hunter, who rarely has anything nice to say about the industry but who has the good sense to know a bad idea when he sees one.

"This legislation is certainly well-intended, but it is not the right way to help those who did not have flood insurance before the hurricanes hit," Mr. Hunter said in a statement released to the media.

Mr. Hunter wisely pointed out that "by definition, insurance purchased after an insured event occurs is not insurance."

Speaking practically, he also warned that "selling insurance after the fact will make flood insurance virtually impossible to sell in the future, as homeowners would anticipate that Congress would treat them in the same way as victims of Hurricanes Katrina and Rita."

The bill's impact could reverberate way beyond Katrina and Rita, he added, predicting that "people with uninsured flood damage from previous floods, such as last year's four hurricanes in Florida, would likely seek to have the same opportunity to purchase coverage retroactively."

He also rightfully spoke out to make sure mortgage lenders "do not escape their financial responsibilities," noting that many "chose to lend money to homeowners in hurricane- and flood-prone areas without requiring the purchase of flood insurance." It's no wonder this sector is backing the Taylor bill, he said, accusing the mortgage industry of "trying to shift the financial losses resulting from bad business decisions to taxpayers." Go, Bob!

This doesn't mean Mr. Hunter is high on the industry. To the contrary, he warned that the Taylor bill would undermine efforts to force insurers to pay their "fair share" of the losses–which, he implied, they are trying to avoid. "If Congress allows homeowners to retroactively purchase flood coverage, insurers will be tempted to deny even more legitimate claims by contending that they are flood-related and payable by taxpayers."

"In the long run this misguided legislation will do more harm than good to consumers and taxpayers," he concluded.

The lack of support from industry bashers like Mr. Hunter will no doubt doom the bill to the scrap heap, where it belongs. Still, insurers need to proactively work with Congress to make sure that we never again face a catastrophe like this, with so few people buying critical coverage that is readily available to them.

Sam Friedman is NU's Editor-In-Chief. He may be reached at sfriedman@nuco.com.

Quotebox, with mug:

"Insurers need to proactively work with Congress to make sure we never again face a catastrophe like this, with so few people buying critical coverage that is readily available to them."