Protecting Homeowners the Right Course of Action

Four years after Hurricane Katrina tore through the Mississippi Gulf Coast, rebuilding homes and communities continues at a snail’s pace. The protection we thought was there to ensure our speedy recovery is the obstacle that stands in our way: homeowner insurance—both its cost and its payment, or the lack thereof.

Skyrocketing cost of homeowner protection
Along the Mississippi Gulf Coast’s three counties—Hancock, Harrison, and Jackson, the residential real estate market demonstrates the ripple effect this insurance crisis is having in our economy and recovery. One large coastal real estate firm recently informed my office that the number of residential contracts that fall through at closing has risen dramatically. Before Katrina, the number was less than 10%. Today, that number has more than tripled to nearly 1/3 of all contracts. The reason? The skyrocketing cost of homeowner’s insurance.

When the bank includes the exorbitant insurance premiums into the debt-ratio equation for the mortgage loan, an increasing number of prospective buyers no longer qualify for the loan. This is so prevalent that coastal realtors are advising potential buyers to shop for insurance before they begin to look for a home.

Commercial insurance rates have also soared for small business owners. In 2007, the Hancock County Chamber of Commerce reported that its members had seen an average increase in premiums of 346 percent with the range between 300 to nearly 670 percent.

Throughout Mississippi’s six most southern counties, major insurance companies refuse to write new policies. This dumps folks into the insurer of last resort—the state government wind pool, which has been subsidized lately with federal taxpayer dollars. Even so, those premiums are out of reach for many. Local Habitat for Humanity chapters report the cost of homeowner insurance is more than the mortgage. Often, qualified applicants become unable to pay for an otherwise affordable home.

The Crisis is National
From the Gulf Coast state of Texas to Florida to New Jersey, and New York, the ever-escalating costs and accessibility of protection have home and business owners facing daunting prospects for protecting their piece of the American Dream. The crisis is national.

Were affordability and access to homeowner insurance the only two problems that would be enough. However, our experience after Katrina taught us that insurance companies betray our trust to provide the protection we need after a natural disaster, protection for which we pay those increasingly skyrocketing premiums.   

Insurers “wouldn’t pay a dime”
Though United States Navy storm modeling reported Hurricane Katrina’s 150 mph winds blew through the Gulf Coast damaging and destroying our homes for 3-4 hours before water came ashore, insurance companies simply refused to pay for wind damage.

In a recent case before the Mississippi State Supreme Court, a lawyer for Nationwide Insurance informed the court that if 95% of a home were destroyed by wind and hours later water destroyed the remaining 5%, Nationwide “wouldn’t pay a dime.” Companies like State Farm sent out memos instructing adjusters to blame all the property damage on water and to send the bills to the National Flood Insurance Program (NFIP), which the American taxpayer subsidizes.

Insurance Companies Confess in Court: "We Wouldn't Pay a Dime" . . . unless sued!

Homeowners were forced to resort to hiring lawyers and engineers to take legal action against their insurance companies who had deliberately delayed paying homeowner wind claims—sometimes by years—before cutting checks that should have been cut within days.

Billion Dollar Homeowner Insurance Industry Bailout
When insurance companies denied homeowner property claims, they also refused to pay for the cost-of-living expenses like rent that come with homeowner policies. Instead, the American taxpayers picked up these costs that the insurance industry should have paid. FEMA trailers alone cost $1.3 billion. Taxpayers also shelled out money for homeowner grants, SBA loans, rental assistance, and tax credits.

By shifting their corporate costs to the American taxpayers, insurance companies essentially gave themselves a government bailout to the tune of billions of dollars while simultaneously posting billions in profits. The industry posted $44 billion in 2005 and $66 billion in 2006.

Protecting The American Homeowner
Private insurance companies leverage our dollars to find ways to deny us the protection for which we pay good American money. It’s now time to admit the obvious. Insurance companies fail to protect America’s homeowners.

We can protect American homeowners and do so without cost to the American taxpayer.

All we have to do is permit homeowners to have the choice of adding wind protection to their federal flood insurance policy. The Congressional Budget Office has already said we can do this without cost to the American taxpayer.

Through permitting Americans the option of purchasing one policy for both types of property insurance coverage—wind and water, we protect American homeowners and remove the opportunity for insurance companies to defraud the federal taxpayers.

Protecting the 55% of Americans who live within 50 miles of our nation’s beautiful coastlines is the right course of action.   

For more information, visit taylor.house.gov/insurancereform.

Comments

[TruelyFedUp]

Why not bypass all the crazy, greed driven betrayals and go directly to a resource based economy - definition of =
A Resource-Based Economy is a system in which all goods and services are available without the use of money, credits, barter or any other system of debt or servitude. All resources become the common heritage of all of the inhabitants, not just a select few. The premise upon which this system is based is that the Earth is abundant with plentiful resource; our practice of rationing resources through monetary methods is irrelevant and counter productive to our survival.

Modern society has access to highly advanced technology and can make available food, clothing, housing and medical care; update our educational system; and develop a limitless supply of renewable, non-contaminating energy. By supplying an efficiently designed economy, everyone can enjoy a very high standard of living with all of the amenities of a high technological society.

http://www.thevenusproject.com/a-new-social-design/resource-based-economy

[rocketman69]

So, if the greedy insurance companies tried to get the 'PUBLIC OPTION' flood insurance to pay the claims, why didn't the not-for-profit government insurance pay everyone and make everything right?

[CoastalAmerican]

The point is that the private insurance companies refused to pay for the wind damage to the homes and businesses. They blamed it all on flooding that came HOURS after the 125-150 mile-per-hour winds blew through everything for 3-4 hours.

The point of the National Flood Insurance Program was never and is not now to bail out the insurance companies. The reason the NFIP exists is because the private insurance industry didn't want to pay for flooding. So they quit selling it In the 60's. Americans clamored and since 1968, I believe, we have flood insurance, which is paid for with private premiums and some from taxpayers. This is a subsidized program, has been from the start.

Get it? The private insurance industry gave itself a bailout long before AIG went to the public trough for welfare.

When you and I pay for a product--especially an expensive one, and it doesn't work, we expect the manufacturer to make good on our purchase. In this instance, the manufacturer is the one committing fraud--both against the homeowner who paid for insurance to cover wind damage and against the federal tax payer who subsidizes the flood insurance program as well as taxpayers who paid for FEMA trailers, etc. for a price tag of billions.

Are you really advocating that the federal taxpayers should condone fraud, bailout the insurance industry while it is posting billions in profit and paying out millions in bonuses? Surely you jest.

[CoastalAmerican]

(Part two from below.)

Heck, there isn't an area in this beautiful nation of ours that doesn't experience some kind of calamity brought on my Mother Nature. All of deserve to have the peace of mind that when we pay our homeowner premiums for theft, fire, wind, earthquake, mudslides, blizzards, or whatnot, that when we submit our legitimate claims we will be paid, paid in full, and paid promptly from our insurance carrier, not the federal taxpayers.

Right?

[CoastalAmerican]

That video is very telling. Insurance companies simply refused to pay on legitimate wind claims and had the audacity, the gall, the arrogance to say that they would not pay on wind claims even if 95% of a home were destroyed by a hurricane force winds?! They said it to a judge, in court, and on video?

This is quite revealing and disconcerting.

If insurance companies are allowed to void their contracts just because they feel like it, we as homeowners will worry ourselves sick knowing that our sense of financial security, our peace of mind is an illusion.

Banks require us to hand over our money to insurance companies in order to get a loan for a home or to purchase/start up/expand a business. In a way, it's a form of extortion--forced to purchase a product that may not work when we need it like after a major disaster: fire, blizzard, tornado, hurricane, earthquake, mudslide. That's wrong.

Insurance is about betting. We're betting we'll need it and pay money for protection, while insurance companies are betting we won't need it as they collect our premiums. Only thing, they have all the tools to make ensure that don't have to make good on the bet.

If a bookie didn't make good on a bet, he'd be run out of town. Seems we ought to do the same with the insurance companies.

[PaPaPeng]

Read this a long time ago. Japan suffers from frequent earthquakes. Traditional houses were built so that when there is an earthquake the house will collapse in known directions and the roof will remain intact. Anyone trapped under the roof will survive in the void of the fallen roof. The house is easily rebuilt by raising the roof on the main support pillars. The wall panels are of lightweight construction and modular. The suggestion here is that houses built in potential disaster zones in the US should adopt a similar philosophy. Design the house to take into consideration local weather based threats. In hurricane prone zones have a sanctuary room in the core of the house that will survive a 200 mph wind say. Everything else can be sacrificed should a hurricane strike. In a flood prone zone have a sanctuary room in the attic that can be detached and floated away to safety. In wildfire threatened zones all roofing material should be fireproof to prevent flyimg embers from starting a house fire. For those with a swimming pool use that water for an external house sprinkler system.

[marignymitch]

So. You support health care insurance gouging but oppose property insurance gouging? Why is one good and other is not? I don't get it. Pls explain.

[okjoel]

Moral? The word of an insurance company is worth very little.

[cheforacle]

I am glad you brought this to our attention. I am sympathetic to these homeowners (or prospective purchasers') plights. It is sad that you do not correspondingly appreciate the same plight of those who pay exorbitant health insurance premiums or cannot afford insurance. In light of your and Louisiana Senator Landrieux's position on the public option, I say we suspend all federal aid to your region until you support the public option and then, if you do, we double or triple the previously planned assistance to your region.

[pithy]

Very interesting, especially considering your stance on Health Care, Mr. Blue Dog!

I watched your town hall on C-Span at Moss Point - you sounded like you have a few beers now & then with best friends John Boehner & Mitch O'Connell.

Soooo - the home insurance industry has learned the game from the health care boys, yes?
And this surprises you?

Readers, we have some very dumb-clucks on the Hill, don't we?

[JimLarkin]

gene, how 'bout next election you run as a republican so a true democrat can have a chance at your seat. the only thing blue about you is your cross and shield.

[ThinkCreeps]

Dreams are easier to protect above sea level, above a flood plane, away from earthquake faults and volcanos, and out of wildfire-prone forests.

Those who dream in pretty but dangerous places should expect to have to expend a bit of self-reliance in exchange. Not all these places can be made safe. I think you'll find no one resists a storm surge evacuation twice, for either good or bad reasons.

[VikingQuest]

"Those who dream in pretty but dangerous places should expect to have to expend a bit of self-reliance in exchange"

Bingo

[MerrieWay]

Protecting the American Dream is a dream lost - tied up by insurance policy and every other red-tape quagmire.
Thanks Rep. Taylor for you well-crafted suggestions. They could be a band-aid in this devastation, but a panacea has yet to surface, greed and ineptitude remain the debilitating forerunners.

[masher]

And the other thing, 55% of the people don't live in the risky areas of the coast. But regardless, the 45% of the rest shouldn't be subsidizing the rich who live on the damn coasts! And how do you define coast?

This is such a scam. This is why the middle class in the US is so screwed. We keep subsidizing the rich in Malibu and the rich on the east coast who build houses on sand dunes that we keep paying to rebuild for them!!!!

[masher]

It should be expensive to live on gulf coastal areas prone to flooding, flood plains, areas prone to wildfires, etc. This isn't a problem. This is actually a very good thing. We should encourage the prices to go even higher until people stop living in areas that we, taxpayers, have to keep bailing out. I'm sick of bailing out people who made stupid choices.

The same goes for Wall Street and the business elite who we keep bailing out. I'm sick of it.

Average American families who work hard and live in safe boring areas keeping getting screwed over paying for other people's risky stupid choices.

[itolduso]

Do you mean all those 'boring' places in the mid west that only have to worry about tornados, floods, ice storms, blizzards, drought, and wild fires? Or maybe we should all move to any of our big cities and only have the 'boring' threats of home invasions, vandalisms, fire, windstorms, heat waves, sub-zero weather, and disasters caused by failing aging infrastructures. Of course, the mountains can be boring too, with rock slides, avalanches, floods, & wash-outs. Bad things happen everywhere.

[bannorhill]

When is someone going to protect the tax payers?

Out of control spending.

Run away deficit.

Growing government programs.

Next......­.........t­axes out the wazoo.

[sc300nc]

Here is a better idea. Instead of relying on the Federal Gov't to handle issues that obviously are best handled by State Government, take care of it yourselves. This it won't cost anybody anything is horse manure. There are costs associated with living along the coast. You either think it is worth it and pay for it, or you do not and find someplace else to live.

Sounds like healthcare redux. Is ObamaHomeCare next?