Senate Gets Closer to Reforming Flood Insurance

On Tuesday, the U.S. Senate panel came closer to reforming the National Flood Insurance Program amid broad agreement that better flood maps are badly needed and with at least one senator backing a plan to add wind damage coverage. 
 
Last week, the House of Representatives voted to overhaul the nearly 40-year-old federal program, which was badly crippled by the 2005 hurricanes, including Katrina and Rita that caused billions of dollars in property damage. 
 
The House bill would expand the flood program to cover wind damage, a response to outrage among some Gulf Coast homeowners over insurers' refusal to pay claims for hurricane damage. Many disputes over coverage centered on wind versus water damage. 
 
Carriers are lobbying hard to block a wind expansion to the program, arguing it would crowd them out of a viable business. The Bush administration has pledged to veto the House bill. 
 
New York Democratic Sen. Charles Schumer took the industry to task over wind coverage, especially among insurers that he said have exited seaside markets on Long Island in his state. He endorsed the contentious House bill. 
 
"Insurers are increasingly unwilling to cover the risk of wind damage," Schumer said at a Senate Banking Committee hearing. "Should the federal government step in? 
 
"The property insurance industry says, no, no, let us cover wind. Then they leave areas like Long Island. Well, gentlemen and ladies, you can't have it both ways."  
 
Marc Racicot, president of the American Insurance Association, an industry group, last week said the House-passed wind expansion would bring "a fundamental realignment of both the NFIP and the private wind insurance market. It would also encourage building in hurricane-prone regions, putting more people and property in the path of devastating storms." 
 
He said: "We believe the solution rests in improving, not displacing, the private sector's ability to serve homeowners and businesses in the path of potential storms." 
 
Congress set up the flood program in 1968 to provide flood insurance that private insurers would not offer. Under the program, administered by the Federal Emergency Management Agency (FEMA), more than 90 companies get government fees to sell flood policies. About 5.4 million policies are in force. 
 
The program requires adoption of certain land use and flood mitigation policies by communities that want flood policies to be available to their residents. 
 
Both the mitigation and insurance programs depend on a third main component -- national flood hazard mapping. 
 
FEMA is supposed to maintain maps of flood zones that are used to determine premium rates, as well as local land use and mitigation, but at the hearing FEMA's maps were criticized. 
 
"The antiquated maps in use right now are a disgrace," said Robert Hunter, a former federal insurance administrator who ran the flood program in the 1970s. Mr. Hunter is now director of insurance for the Consumer Federation of America, an activist group.