[StBernard] Rep. Melancon Votes for Multi-Peril Homeowners Insurance Bill

[Westley Annis]

WASHINGTON, D.C. – U.S. Rep. Charlie Melancon (D –LA) voted today in support of legislation to end the “wind vs. water” insurance debate by creating federal multi-peril insurance that provides coverage for both windstorm and flood damage in one policy.  H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, includes provisions expanding the federal National Flood Insurance Program to allow NFIP policyholders to purchase windstorm coverage directly from the federal government, in addition to flood insurance. Rep. Melancon co-sponsored the legislation.  He also co-sponsored the original bill to provide multi-peril insurance, H.R. 920, that was introduced by Rep. Gene Taylor of Mississippi, whose home was destroyed by Hurricane Katrina.  

 

“Hurricanes do not distinguish between wind and water damage, so why should insurance policies?” asked Rep. Melancon. “As Katrina and Rita have shown, homeowners in coastal communities need both.  Two years after the storms, many people along the Gulf Coast are still fighting with their insurance companies for the wind damage payments they deserve.  What’s more, many insurance companies have stopped writing new wind damage policies in coastal communities, causing an insurance crisis for middle class homeowners.  This legislation will give families in coastal communities the option of buying both wind and flood damage coverage in one policy, so they have the assurance that when they take the responsible action of insuring their home, they will be able to rebuild if a disaster strikes.” 

 

In July, Rep. Melancon testified in support of the multi-peril homeowners’ insurance bill before a subcommittee of the House Financial Services Committee.  Since Hurricanes Katrina and Rita, premiums in south Louisiana have skyrocketed and many homeowners have had their policies cancelled.  As private insurance companies have pulled out of coastal Louisiana, more and more homeowners have had to turn to the state-sponsored “insurer of last resort,” which by law charges above-market premiums.  During the hearing, Rep. Melancon shared the stories of several of his constituents in south Louisiana who have been hit with huge premium increases or had their policies cancelled altogether.  His testimony is attached.

 

The legislation passed by the house today also reauthorizes the National Flood Insurance Program (NFIP) for five years -- through FY 2013 (the current authorization for NFIP expires on September 30, 2008).  In addition, the bill provides for reforms to the NFIP and improves flood mapping.  Following are highlights of some of the bill’s provisions. 

 

Provides for an optional multiple peril policy.  The bill includes provisions to responsibly expand the Flood Insurance Program to provide for an optional multiple peril policy – to allow property owners to purchase wind and flood coverage in a single policy.  A homeowner or business in a flood plain would have to sign up for flood coverage to obtain the wind coverage.  Wind coverage would not be available separately.  The bill requires premiums for the new optional coverage to be risk-based and actuarially sound, so that the program would be required to collect enough premiums to pay claims.  Under the bill, multiple peril policies would be available where local governments agree to adopt and enforce building codes and standards designed to minimize wind damage, in addition to the existing flood program requirements for flood plain management. (Click here <javascript:void(0);>  for a fact sheet from Rep. Gene Taylor’s for more information.)

 

Ensures the National Flood Insurance Program’s continued viability by phasing out unnecessary subsidies.  To make the Flood Insurance Program more actuarially sound, the bill phases out subsidized rates on commercial properties, vacation homes, and second homes built before 1974.  Multifamily rental properties are excluded from the phase-out of the subsidy. 

 

Ensures the program’s continued viability by encouraging broader participation.  To encourage participation in the Flood Insurance Program, the bill provides for a new community outreach program, and provides for a study of how to increase participation by low-income families.  In order to help ensure that those homeowners who should have flood insurance do have flood insurance, the bill increases the fines on lenders who do not enforce the mandatory flood insurance policy purchase requirement for those who live in a floodplain and hold a federally-backed mortgage.

 

Ensures the program’s continued viability by requiring greater fiscal accountability and authorizing higher rates.  The bill requires FEMA to report to Congress annually on the financial status of the Flood Insurance Program.  It also increases the amount FEMA can raise policy rates in any given year from 10 percent to 15 percent. 

 

Requires the updating and modernizing of flood maps. The bill requires FEMA to conduct a thorough review of the nation’s flood maps.  It also makes the updating and modernization of flood maps an ongoing process, and increases funding for mapping.  In addition, it authorizes the Technical Mapping Advisory Council, made up of industry professionals, to advise FEMA on flood mapping.

 

Addresses some of the program’s weaknesses exposed by the 2005 hurricane season.  Under the bill, small business owners will be eligible to purchase business interruption coverage at actuarial rates to better prepare them to meet payroll and other obligations during the next big storm.  And, for the first time since 1994, the bill updates maximum insurance coverage limits for residential and nonresidential properties.

 

Improves consumer protections.  The bill clarifies the disclosures that must be made to consumers about flood insurance.  It also requires “plain language” information on flood insurance policies.  Landlords must notify tenants of contents’ coverage availability.  Further, the bill makes flood insurance effective immediately upon purchase of a home. 

 

 

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