Homeowners Deserve a Truly Comprehensive Insurance Policy

Posted October 16, 2009 at 2:15pm

Congress is preparing to extend the National Flood Insurance Program for another year, but there are many challenges and inefficiencies in the program, such as a lack of adequate controls and scope of coverage. American consumers deserve full, fair and comprehensive coverage against natural disasters, and changes are necessary to help consumers meet their needs.[IMGCAP(1)] One key step toward resolving these issues would be for Congress to allow insurers to offer a new kind of property insurance that combines into one policy the wind insurance coverage of a traditional homeowner’s insurance policy with flood insurance coverage similar to that now offered by the NFIP. We (Nationwide Mutual Insurance Co.) are proposing Congressional legislation that would allow insurers to provide this new property insurance, called the Enhanced Homeowners Insurance Policy.The flood coverage provided under this enhanced policy would be reinsured by the Treasury Department. Insurers would be required to charge the same amount that would be charged for the same coverage by NFIP, and they would be prohibited from making any profit on the flood coverage. In fact, insurers selling the enhanced policy would have to set aside the premiums collected for the flood portion of the coverage in separate bank accounts that could only be used to pay flood claims and related costs EHIP policies could compete in every state with existing standard homeowners’ policies regulated by each state’s insurance department. No company would have to sell EHIP policies and no consumer would have to buy one. For those who did, however, the EHIP policy would offer a number of advantages over the current options, including:• Coverage in one policy for losses due to natural disasters without regard for whether the damage is caused by wind or flood.
• Greater consumer choice because the enhanced policies provide an additional option for homeowners.
• Greater price competition because insurers price their enhanced policies in the marketplace.
• Creative federal-state regulatory coordination because state insurance regulators assure consumer protections, while the federal government provides national regulatory oversight and flood reinsurance.
Over the past few years, we’ve repeatedly witnessed devastation brought on by flooding. From the coast to deep in the heartland, flood damage has been a major issue for our nation, and the propensity for future losses does not appear to be diminishing.If Congress were to make this enhanced home insurance policy an option, the result would increase both customer choice and customer confidence It would provide an additional option for customers to consider as they make key decisions to protect their home. Existing coverage options would also be available. Consumers could still purchase a policy that does not cover flood damage, or a stand-alone flood policy from the federal flood program. However, for homeowners who desire comprehensive coverage, this policy would provide it for them. At the end of the day, consumers want seamless coverage at competitive and affordable prices. They also want accountability and assurance the coverage will be there if they need to file a claim. A new coverage option like EHIP is a good way to help make that happen.Lynn Greenstein is the senior vice president of product and pricing for Nationwide Mutual Insurance Co., based in Columbus, Ohio.