The storm surge from Hurricane Katrina exposed many weaknesses in southeast Louisiana's flood protection systems. Now, 18 months later, we march toward the next hurricane season still facing weaknesses in the nation's federally sponsored flood insurance program. While memories and images of Katrina are still all around us, Congress should act to shore up the National Flood Insurance Program (NFIP) so that coastal and low-lying communities across America can have real protection from catastrophic floods. Congress should act now, before the next hurricane season is upon us.
Truth be told, NFIP stands as one of the relative successes of the Federal Emergency Management Agency (FEMA) -- as far as the program goes. And there's the rub. Most homeowners and businesses that had flood insurance found that adjusters and administrators paid claims fully and in a timely manner. In fact, flood insurance may be the only federal program that put money into Katrina victims' hands efficiently after the storm. But, to the dismay of many, policyholders learned that NFIP's coverage limits were inadequate to fully compensate homeowners and businesses for their flood-related losses. Worse, private-sector underwriters were tight-fisted -- if not fraudulent -- in denying many thousands of hurricane claims, putting victims in a financial vice from which many are still trying to escape.
The answer to this predicament, in our opinion, lies in improving the product that already works relatively well -- NFIP. Less than three months after Katrina, the Independent Insurance Agents & Brokers of America, also known as "The Big I," suggested a series of flood insurance reforms that would raise coverage limits, set minimum coverage amounts for contents, simplify processing and claims, allow businesses to buy "business interruption" coverage for flood losses and provide other reforms (http://www.insurancejournal.com/news/national/2005/11/11/61827.htm).
While NFIP is a federal program, policyholders use private insurance agents to buy it. The agents who comprise The Big I are thus familiar both with the needs of flood victims and with the coverage gaps between federal flood policies and privately placed windstorm policies. Their proposals for improved and increased flood insurance protection, unlike many legislative initiatives from the private sector, are not self-serving. Congress should, therefore, give serious consideration to these ideas.
Indeed, the U.S. House of Representatives, led in part by Congressman Richard Baker of Baton Rouge, passed a flood insurance reform bill last June that largely tracked the 22 specific reforms promoted by The Big I. Unfortunately, the measure languished in the Senate and failed to pass before the 109th Congress adjourned in late December. Baker, a Republican, showed great skill in working with both sides of the aisle on this and other storm-related issues. Now it's the Democrats' turn to stand and deliver. They control both houses of Congress, and in light of their claims to be more concerned about the Gulf Coast's struggles post-Katrina, this issue presents a great opportunity to show that their actions match their rhetoric. For his part, Baker pledges to continue pushing flood insurance reforms. Considering that many low-lying, noncoastal communities -- Sacramento, Calif., and many parts of the Northeast, for example -- have either experienced recent flooding or are in constant danger of flooding, this should be a bi-partisan issue that touches most parts of the country.
In particular, we endorse the following elements of The Big I's reforms:
• Increase the maximum coverage limits above the current $250,000 for residences and $500,000 for commercial buildings so that they reflect current real estate prices -- and provide for periodic adjustments to track inflation.
• Provide for automatic, minimum amounts of "contents" coverage for all building policies, with additional contents coverage available for additional premiums.
• Provide for automatic, minimum coverage levels for additional living expenses on all residential policies, with an option to buy higher coverage levels.
• Add optional business-interruption coverage on all commercial flood policies.
These changes alone, had they been in place before Katrina, would have obviated the need for much of the federal aid that is now stalled on its way to Gulf Coast citizens. Had individuals and businesses been able to buy higher coverage limits and flood-based business-interruption insurance, thousands more would already be back home and back at work -- instead of suing their windstorm insurers or waiting for Road Home money.
Some in Congress actually want to dismantle NFIP, saying it costs taxpayers too much. Yes, rates need to increase. But Congress also needs to remember that it refused to fund levee projects adequately for several decades, under Democratic and Republican presidents, thus forcing another arm of the federal government -- the U.S. Army Corps of Engineers -- to design and build defective floodwalls all around New Orleans. This is a federal problem. Fortunately, there is a sound federal solution. Congress has the chance, and the duty, to make NFIP work even better. We urge Congress to act now, before the next hurricane season is upon us.