U.S. House expands flood insurance program

Yielding to cries from homeowners and businesses still dealing with insurance woes in the wake of hurricanes Katrina and Rita, the U.S. House of Representatives recently passed legislation that would expand the government’s flood insurance program to also cover wind damage.

The bill, which would renew the federal program through 2013, passed the House by a margin of 263-146.

Although legislators representing coastal areas hailed the bill’s passage, the White House has threatened to veto the measure, citing cost concerns.

Traditionally, private insurance companies do not provide flood coverage; homeowners have to purchase flood insurance from the National Flood Insurance Program (NFIP), created many years ago by the U.S. Congress. The program currently counts millions of American homeowners and businesses as policyholders.

The U.S. House bill, which has no Senate companion bill, advocates adding the wind provision to NFIP policies. Lawmakers cited the problems homeowners faced in the wake of the 2005 storms.

“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,” said Congressman Charlie Melancon (D-Napoleonville), who co-sponsored the original House bill.

Although it passed the House by a comfortable margin, the bill still has formidable obstacles to overcome before it becomes law.

The Bush Administration argues the new provision exposes taxpayers to excessive claims and encourages increased development in high-risk, flood-prone areas. Several influential interest groups – including the American Insurance Association – oppose the bill because adding wind coverage to an exclusive government could essentially limit sales to one of the industry’s most profitable clauses, Melancon explained.

Language in the bill allows policyholder rates to be increased as much as 15 percent annually. The current law caps rate hikes at 10 percent annually.

Thus far, private insurers have paid out over $58 billion in claims resulting from damage caused by hurricanes Katrina and Rita.