Taylor taking on insurance. Bill seeks to create all peril policy

February 8, 2007, Anita Lee, Sun-Herald© (Biloxi, MS)

View Sen. Taylor’s Bill (http://www.sunherald.com/multimedia/sunherald/images/0207.taylor.multiperil.bill.pdf)

U.S. representatives from California, New York, Massachusetts, North Carolina and Louisiana have signed on to co-sponsor a bill U.S. Rep. Gene Taylor, D-Miss., plans to introduce in the House today creating a national insurance policy for wind and water damage.

"Multiple peril insurance would meet the increasing demand for disaster insurance in coastal regions," Taylor wrote in a memo to colleagues. "Insurance companies are withdrawing from coastal areas, doubling or tripling premiums and forcing states to take on more disaster risk."

To illustrate his point, Taylor included a list of headlines from newspapers along the coastlines about increasing premiums and shrinking coverage.

The insurance industry, however, is likely to lobby against the bill, which establishes the policy under the auspices of the National Flood Insurance Program as an alternative to a flood policy. Private insurance policies cover wind damage.

"With homeowners' policies and the flood program as it exists, you have those perils covered," said Joseph Annotti, spokesman for the Property Casualty Insurers of America. "We just question a mandate for expanded coverage for risk that is fairly limited geographically.

"It just seems to be a matter of principle. Expanding the government's role where the private market can and should be acting is a little dangerous."

The key to improving coastal markets, Annotti said, is stronger building codes and mitigation measures in flood-prone areas, allowing property-tax credits and reductions in insurance premiums for property owners who meet the standards.

Taylor's bill includes those controls, too. Property owners could take advantage of national multiple peril insurance only if their communities adopt the program and agree to meet building standards.

Unlike the flood program, premiums would be based on actual risk, meaning homeowners would payer higher rates for the multiple peril insurance.

The bill would limit coverage on residential structures to $500,000, with a $150,000 cap for contents and loss of use. Businesses and churches would be limited to $1 million for structure coverage, and $750,000 for contents and loss of use.

In his memo Taylor also pointed out: "The Multiple Peril Insurance Act would allow homeowners to buy insurance and know that all of their damage from wind and water will be covered. They would not have to hire lawyers, engineers and adjusters to determine what damage was caused by wind and what was caused by flooding."

Sen. Trent Lott, R-Miss., is reviewing Taylor's bill. A spokesman in his office said Wednesday that Lott has co-sponsored a bill in the Senate that would establish a committee to review the issue of disaster insurance.

Concluded Robert Hartwig of the industry-sponsored Insurance Information Institute:

"This is likely to be a divisive issue. I think many insurers will not be thrilled with the notion that, in areas where they have historically provided wind coverage, which by the way is the vast majority of the country, that the NFIP would be allowed to intrude."

Given the problems with flood rates, Hartwig said it's unlikely NFIP could achieve a financially sound multiple peril insurance program.