“Consumers expect all-perils coverage and, in some cases, they incorrectly believe they have it,” Praeger said. “We think Rep. Taylor's proposal should be considered in the broader context of natural catastrophes and today we offer some alternative concepts to consider.”
Taylor's multi-peril insurance bill, H.R. 920, would allow the National Flood Insurance Program (NFIP) to offer wind coverage. The NAIC believes this approach would help resolve potential conflicts between consumers and carriers regarding the cause of damage to their homes during a hurricane: i.e., wind from the hurricane and/or water damage from a subsequent flood. However, Rep. Taylor's solution would move the line of contention to other perils, such as fire or earthquake damage.
Commissioner Praeger's testimony, therefore, proposed some broader alternatives. For example, she suggested the NFIP could be restructured to function as a reinsurer. By doing so, any debate over what might have caused the loss would be between the insurer and the NFIP, not the consumer. Alternatively, the private market could offer all-perils coverage and be supported by a federal backstop or credit line that would cap the industry's share of such catastrophic losses — helping insurers manage their claims-paying ability while keeping insurance affordable for consumers. These proposals could be structured to leave the private market as the first line of defense, while recognizing the roles of state and the federal government in managing natural disasters.
Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories. The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials.