"What Do the Simple Folk Do?" or "I Just Can't Wait to Be King"

Sen. Trent Lott inserted a provision in a Homeland Security appropriations bill that requires the Department to examine Katrina claims to make sure that the insurers are not putting wind claims to the Federal Flood Insurance program.  Senator Lott lost his house in Mississippi from Katrina and wants to make life more difficult for the insurers in the state.   I wonder what folks can do to the nasty old insurance industry if they aren’t US Senators?

I also wonder if the Federal Flood Insurance program really has an incentive to take non-flood claims from insurers. I doubt it.  In fact, I recall (but I can’t find) the Federal Flood Insurance Administrator as saying early on this was something they would look at carefully. 

Via Lars and National Underwriter.

update: The New York Times is almost asking whether this is kosher behavior. Here is the first sentence of an article from today's paper.

"Sometimes, political connections come in handy. Ask Senator Trent Lott of Mississippi."

While the Times cannot be expected to like a Republican Senator from Mississippi, the Time's natural inclination may be to favor the Katrina victims in their dispute with the old insurance industry.  However, the article does seem to be relatively favorable to the insurance industry.

Sen. Lott also says he wants to repeal the insurance antitrust exemption because he believes the insurers keep prices high?  He also wants to investigate their "tax rates."  This sounds awfully Nixonian in its petulance. 

The antitrust repeal is relatively meaningless especially since in unregulated states, where insures have leeway to set prices, homeowners and auto insurance are two of the most competitive markets for any product in the country.  Further, if Senator Lott desires to hurt small inefficient companies by taking away their ability to share data, I am in favor of that too as we have a large robust industry and we do not need to subsidize any company.  However, what it may mean is that there are fewer insurance companies to choose from as smaller companies may or may not have enough data to set prices. 

Secondly, while I kind of understand the special aspects of insurance taxation,  Senator Lott likely does not.  He will find that the insurance tax rates are the same as other non-insurance companies. What is interesting about insurance taxation is not the rates, but the reserving practices.  Reserving can make even the most geeky tax lawyer throw up both hands in despair. I wish Sen. Lott good luck getting other people excited about it.  Someone once told me the only thing more boring than tax law, was insurance tax law.

 

Comments

[JD]

Lott also told the New York Times that he is introducing legislation to force insurers to include in their policies a "a prominent listing in plain English of what they refuse to cover."

Yes, if only there were a section in insurance policies explaining what we didn't intend to cover - things the policies "exclude," if you will. As it is, the contracts hide such language in a section misleadingly labeled "EXCLUSIONS," and insurers try to confuse customers by using esoteric legal language like, "We will not pay for loss caused by or resulting from any of the following."

[Brian]

No home in Mississippi was destroyed by flooding alone. The worst destruction was caused by the combination of wind and surge, but several insurers assigned all such damage to flooding. They paid wind only where they could not possibly blame flooding. NFIP did not scrutinize the claims. There are whistleblower allegations of forged and fraudulent engineering reports. An Inspector General's investigation is the least the federal government can do to look out for taxpayers and consumers.