Insurance payout muddled or Gulf Coast hurricane victims

McClatchy Newspapers (MCT) - The problem of separating wind and water damage after a hurricane will not go away, U.S. Rep. Gene Taylor knows.

In fact, he has been educating his Texas counterparts on what they can expect from the insurance industry after Hurricane Ike. Sympathetic adjusters will handle flood claims for residents who have federal flood coverage, cutting checks quickly with assurances that wind claims will be investigated.

In the end, the private carrier who adjusts both claims through an agreement with the National Flood Insurance Program will offer policyholders nothing, or pennies on the dollar, for wind damage to properties also hit by tidal surge.

It is true that surge is far more destructive than wind. But even insurance claims executives concede it is difficult, at best, to sort out the cause of loss on Coastal properties obliterated by hurricanes.

Those with resources can wait for the courts to sort out the damage, a process ongoing three years after Hurricane Katrina.

To Taylor and many residents of Gulf and Atlantic coast states, a policy that combines the two hurricane hazards is the only sensible solution. However, consumer advocates question the wisdom of expanding a National Flood Insurance Program that is $17 billion in debt from Katrina, subsidizes flood rates and is subject to the vagaries of politics.

And then there are the opponents who have the money to organize e-mail campaigns, fund anti-federal wind studies and influence lawmakers: the insurance industry and its lobbyists. The industry's campaign contributions consistently rank in the top 10 of more than 80 monitored by the Center for Responsive Politics.

"You've got guys in $1,000 suits and women in $1,000 suits and $500 shoes going to bat against homeless people in Mississippi," said Taylor, who referred to residents without the resources to rebuild their homes after Katrina. (In fairness, many of these residents lived on property that flooded but were without flood insurance because of the outdated maps or because they mistakenly thought their private insurance policies with "hurricane deductibles" covered their hurricane damage.)

"They wander the halls of Congress. They monitor the hearings. They regularly attend the candidate fundraisers. When we had wind vs. water hearings, 95 percent of the people in that audience were lobbyists for the insurance industry. They're everywhere."

The staff of Rep. Barney Frank, who has supported the multi-peril bill, offered a compromise that would have created a pilot program to test adding wind to NFIP. Taylor's senior policy adviser, Brian Martin, said senators immediately leaked the offer to insurance lobbyists, who then publicly blasted the proposal.

Despite the opposition, Taylor vows he will be back with the same bill in 2010. He says he has been promised Frank's support once again to pass the bill through the House Financial Services Committee.

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"Here's the thing," Martin said, "the flood insurance program is not part of the normal policy agenda in Washington. So what happens when you have an area that only occasionally comes up, you have a few people on the committees of jurisdiction who take interest and you have the power the lobbyists have to run the show. Most of the congressmen and senators are not up enough on the program to know when they've been misled."

J. Robert Hunter, president of the Consumer Federation of America, believes the current multi-peril bill has serious flaws. Hunter is a former Texas insurance commissioner and also has previously headed NFIP.

"It doesn't make sense to have a program implemented without any standards any land-use standards, any rate standards, any underwriting standards. Nothing. Just run it. That's irresponsible," Hunter said.

"Maybe you can have a federal program, but it's going to have to be studied first. You don't do the study after you have a program."

Martin believes the multi-peril proposal includes the needed guidance on issues such as building construction standards and rates. Unlike the flood program, Taylor's proposal requires the wind program to pay for itself by charging sound rates. Martin said he has asked Hunter to propose language that would tighten requirements, but received no response.

Another consumer advocate, Amy Bach of United Policyholders in California, understands the problems property owners face with insurance after hurricanes. She said those who suffer the worst are property owners with limited resources who are desperate enough to accept the insurance check they're handed whether it's fair payment or not.

"I've been working these catastrophes now for a long time," she said. "Nothing changes. I've been to Galveston."

Still, Bach sees NFIP as a flawed and unapproachable behemoth and the federal government as too inept to take on more risk.

"These are big problems that need big solutions," she said, "and I don't see any of them being solved overnight."

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© 2008, The Sun Herald (Biloxi, Miss.).