WASHINGTON — When Hurricanes Katrina, Rita and Wilma hit in 2005, all that was left of homes along the Gulf Coast for miles were slabs of concrete. For many homeowners, that was just the beginning of the problem.
Insurance claims on wind and water damage have caused headaches for people trying to rebuild their homes and communities. Private insurers cover wind damage, and a federal program, the National Flood insurance Program, covers water damage. With only slabs to go on, there was no way to determine what was blown and what was washed away. Homeowners sued insurance companies for wind damage that could have been caused by flooding. Insurance companies more often than not determined that storm surges were responsible for the destruction. Some lawsuits are still in court today.
Policymakers now think they can stop the finger-pointing.
Scott Richardson, a former director of insurance for South Carolina, said at a Senate Banking, Housing and Urban Affairs Committee hearing Thursday that it was possible to use currently available scientific data to model a storm and determine how much wind and water damaged an individual house. In addition, statistical models can be used to predict the loss.
A reliable system for determining total losses would give the marketplace certainty, entice private insurers and drive premiums down, making insurance more affordable, he said.
"We have the tools to determine this right now," Richardson said. "When we can catalog and know exactly — or as close as we can from scientific evidence — what is wind and what is water, why would you not do that?"
The National Oceanic and Atmospheric Administration and private companies already have created relevant models, so creating a national one wouldn't be difficult, Richardson said. However, because the technology that collects the data is primarily focused on coasts, the quality of the data may be worse for areas further from the shoreline and require improving.
The proposal is part of a Senate bill, the COASTAL Act, proposed by Sen. Roger Wicker, R-Miss. The legislation seeks a five-year reauthorization of the National Flood Insurance Program and particularly aims at solving the problem of determining liability for total losses in a hurricane.
Wicker said the legislation would protect everyone involved, including taxpayers. Under the current system, insurance companies are responsible for determining whether wind or water caused the damage. This obvious conflict of interest often put taxpayers on the hook for the bill, Wicker said.
"This system will help us hold insurance companies accountable for covered losses rather than forcing taxpayers to foot more of the bill through the deeply indebted National Flood Insurance Program," Wicker said at a previous hearing.
"The taxpayer was ripped off royally in many cases because of ... wind damage being pushed onto the flood side and to the taxpayer," said Sen. David Vitter, R-La., who supports Wicker's bill. "It happened over and over and the taxpayer was left holding the bag."
But confusion about liability in total losses is just one of the many issues that plague the program. Experts and politicians alike have called the National Flood Insurance Program broken. It has an outstanding debt of nearly $18 billion because of heavy borrowing in years of catastrophic flooding. It uses outdated maps that incorrectly assess the flood risks to some homeowners. A Government Accountability Office report released at the hearing cited myriad instances of mismanagement, including lack of oversight of contractors and private insurers.
Yet another pox on the program has been short-term reauthorizations, which led the program to lapse three times last year. The current program expires at the end of September. Several senators at Thursday's hearing called for a long-term extension.
Rick Curtsinger, a spokesman for Wicker, said he was optimistic about the bill's chances, since two hearings already had been held in the Senate this month and a House of Representatives bill was up for debate on the floor this summer.
"Both chambers see the importance of getting something done," Curtsinger said.
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