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NU Online News Service, July 2, 1:26 p.m. EDT
WASHINGTON—An insurance industry official told a congressional panel that lawmakers must be careful to ensure any expanded federal insurance does not artificially suppress rates or crowd out private carriers.
The remarks from Robert Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, were made today at a session on catastrophe insurance issues held by the Oversight and Investigations Subcommittee of the House Financial Services Committee, in Palm Beach, Fla.
Mr. Detlefsen said Congress should not mandate policies that “encourage unwise residential and commercial development in high-risk coastal regions.”
The hearing focused on Homeowners Defense Act, legislation (H.R. 2555), recently introduced by Rep. Ron Klein, D-Fla., who represents the Palm Beach area, as well as on the affordability and availability of coastal insurance in general.
Insurance groups unanimously oppose such legislation. It passed the House in the last Congress, but failed to win support in the Senate by a vote of 73-19.
Among supporters of the measure was Raymond Spudeck, chief economist for the Florida Office of Insurance Regulation who argued that the approach is less costly to the American taxpayer.
He testified that current U.S. policies dealing with catastrophes ultimately cost the American taxpayer more in the long run.
“While it is true that our current reliance on federal payments for large-scale disaster does spread the cost of these events across a broad pool, the American taxpaying public, it does so rather ineffectively,” he testified.
And, Mr. Spudeck said, “the current system of insuring large scale disasters in the case of hurricanes can and frequently does create unwanted and unneeded volatility in the marketplace, which adversely affects property owners.
“Perhaps more problematic,” he added, “is that precious little of this money is being invested in programs or projects to prevent this sort of scenario from repeating.”
In his testimony, Mr. Detlefsen said that insurance companies realize that anyone who lives or does business in coastal areas faces serious challenges from natural disasters.
But, he said, “We believe that the most effective mechanism for addressing these challenges is a private insurance market that is free to appropriately match rate to risk.”
He suggested that Congress “can play a key role” by reforming the National Flood Insurance Program as well as by creating incentives for states to enact and enforce effective statewide building codes.
He also said that providing targeted grants that would enable low-income property owners to pay risk-based property insurance premiums would be helpful.