The Retroactive Flood Insurance Policy Option
Thursday, September 22, 2005SUSIE GHARIB: Insured losses from hurricane Katrina and already estimated between $40 and $60 billion. Billions more will be covered by the Federal flood insurance program. Still, many Americans hurt by Katrina never bought flood insurance. And as Darren Gersh reports, there`s an unconventional plan in the works tonight to let them buy it after the fact.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Much of Congressman Gene Taylor`s Mississippi district was washed off the map by Katrina. In many towns every home was destroyed.
REP. GENE TAYLOR (R) MISSISSIPPI: It`s not like there is still a roof there or walls. They are just gone.
GERSH: Now, Taylor is working to rewrite the rules of the national flood insurance program to let homeowners who weren`t required to buy it to purchase retroactive flood insurance coverage. The help comes at a price.
GEORGE BERNSTEIN, FORMER FEDERAL INSURANCE ADMINISTRATOR: Pay a penalty for not actually belonging on the day, pay a 10-year premium back premium, and then promise to stay in the program so that they`re not gaming it, that they don`t just get a check and run off.
GERSH: Federal flood insurance is designed as a tradeoff. Local governments agree to enforce building standards that reduce flood damage for new construction and in return the Federal government covers older, more vulnerable homes with subsidized flood insurance. George Bernstein helped develop the program in the Nixon administration. He says it makes no sense to let people buy in retroactively.
BERNSTEIN: Why don`t you just call it welfare? That`s not insurance. Don`t call it insurance. That is one of the things that has always bugged me when you try to disguise one program as another program. If the Congress wants to do that, that`s fine, but don`t call it insurance.
GERSH: Taylor calls it fairness. He says, for example, the Gulf coast helped New York recover after 9/11.
TAYLOR: I, along with all the people of Mississippi, all the people of Louisiana, all the people of Alabama, paid our tax dollars to help make them whole. I am asking for these folks to help make Mississippi and Louisiana whole.
GERSH: Flood insurance is only required for homes that are in a floodplain and carry a mortgage. Taylor wants to extend retroactive coverage to homes located outside the floodplain, which experts say could be a major change.
REBECCA QUINN, LEGISLATIVE OFFICER, ASSOCIATION OF STATE FLOODPLAIN MANAGERS: In a sense, there is a possibility that policy holders all across the country could end up subsidizing reconstruction in areas where there is no land management.
GERSH: Talk of expanding the program comes as the losses in the flood insurance program are sure to mount. The threat from Rita stretches from Corpus Christi to Port Arthur and up into Houston. It`s an area that covers more than a quarter million flood insurance policies with a total value of more than $43 billion. By comparison, in the New Orleans area, 216,000 homes carried flood insurance with a total coverage value of $28 billion. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
