NAIC Testifies Before Congress On All-Perils Insurance

This week, Kansas Insurance Commissioner Sandy Praeger spoke before the U.S. House of Representatives Subcommittee on Housing and Community Opportunity on behalf of the National Association of Insurance Commissioners (“NAIC”). 

The text of Ms. Praeger’s presentation may be accessed by clicking here.

The Webcast link to the Subcommittee Hearing can be viewed by clicking here.

The NAIC issued the press release below.

Should you have any questions or comments, please do not hesitate to contact this office.

 

NAIC Testifies Before Congress On All-Perils Insurance

WASHINGTON, D.C. (July 18, 2007) — Speaking before a key subcommitee of the U.S. House of Representatives Tuesday, Sandy Praeger, President-Elect of the National Association of Insurance Commissioners (NAIC) and Kansas Insurance Commissioner, testified on the merits of all-perils insurance coverage. Commissioner Praeger commended the Subcommittee on Housing and Community Opportunity for holding the hearing and thanked Rep. Gene Taylor (D-MS) for raising the issue of improving the coverage offered to consumers.

“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.”

Rep. 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 insurers 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.

“Kansas recently had tremendous flooding. In its wake, too many of our citizens discovered that they were either uninsured or under-insured for such a disaster. This hearing highlights the need for regulators and legislators to work together to develop a better product that closes the gaps in coverage and encourages personal responsibility,” Praeger said.

 

U.S. House of Representatives Subcommittee on Housing and Community Opportunity

Witness List & Prepared Testimony:

Panel One

• The Honorable Richard H. Baker
• The Honorable Gene Taylor
• The Honorable Charlie Melancon
• The Honorable Bobby Jindal 
   

Panel Two

• Mr. David I. Maurstad, Assistant Administrator for Mitigation, Federal Emergency Management Agency  
• The Honorable Phillip Swagel, Assistant Secretary for Economic Policy, U.S. Department of the Treasury  

Panel Three

• Ms. Pam Pogue, Vice Chair, Association of State Floodplain Managers  
• Ms. Sandy Praeger, Commissioner, Kansas Insurance Department, on behalf of the National Association of Insurance Commissioners  
• Mr. Ted A. Majewski, Senior Vice President, Harleysville Insurance, on behalf of the Property Casualty Insurers, American Insurance Association, and National Association of Mutual Insurance Companies 
• Ms. Cheryl Small, Policy Advisor, National Flood Determination Association
• Mr. W. Anderson Baker, III, CPCU, ARM, Gillis, Ellis & Baker Inc.
• Dr. Robert P. Hartwig, Ph.D., CPCU, President and Chief Economist, Insurance Information Institute
• Mr. David Conrad, Senior Water Resources Specialist, National Wildlife Federation

 

About the Housing and Community Opportunity Subcommittee

The Housing and Community Opportunity subcommittee, led by Chairwoman Maxine Waters (CA), oversees the Department of Housing and Urban Development, and the Government National Mortgage Association. The subcommittee also handles matters related to public, affordable, and rural housing, as well as community development including Empowerment Zones, and government-sponsored insurance programs, such as the National Flood Insurance Program. 

 

To read news coverage of the Subcommittee Hearing from Insurance Journal, click on the headline below:

Regulators Testifiy before Congress in Support of All-Perils Policy