Retroactive insurance?


Congress loses some more common sense

The Republicans have a point with this one.

But Republicans said allowing retroactive coverage for some homeowners would turn the whole concept of insurance on its head. "If we did this, why would anybody buy health insurance? Why would anybody buy auto insurance? Why would anybody buy fire insurance?" said Rep. Jeb Hensarling, R-Texas. "We will rue the day that we did this."

Financial Services Capital Markets Subcommittee Chairman Richard Baker, R-La., agreed that the proposal would set a "difficult" precedent. Baker said it also would lead to an enormous increase in the amount of money that FEMA would have to borrow from the Treasury Department to pay out hurricane-related claims.

"I just don't know that we should go there," Baker said. "I am not opposed to this for any other reason than I do not believe it would be in the best interests of our constituents right now."

The flood program is funded by premiums and does not use taxpayer funds to pay claims or operating expenses. But FEMA is allowed to borrow funds from Treasury -- which it later repays with interest -- to pay catastrophic NFIP claims that exceed the flood program's budget. The House and Senate last week approved emergency legislation to increase FEMA's borrowing authority from $3.5 billion to $18.5 billion to pay claims related to hurricanes Katrina and Rita.

I just want to stress three things here. The program as it exists now is self funding, even if it is backed by the Federal government. If there is no difference between buying insurance and not buying insurance, people will spend their money on something else. And the artificially low subsidized Federal flood insurance encourages people to build in flood plains.

— NeoWayland

Posted: Wed - November 30, 2005 at 04:29 PM  Tag


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