The answer to the title question should be:
"Nobody should trust the government to conclusively determine anything."
The property insurance law news is that a Mississippi Senator has proposed federal legislation that would allow FEMA to determine the amount of wind damage versus flood damage an insured structure sustained when the issue arises. Anita Lee, of the Sun-Herald, reported on how this proposed system would work in Wicker Charts New Course for NFIP Changes:
The National Oceanographic and Atmospheric Administration would gather hurricane data from public and private sources. FEMA would use the data to apportion losses between wind and flood.
Elevation and construction materials for each property would be included in the assessment.
Any disputes that arose over a wind/water allocation would be resolved by a FEMA-appointed arbitration panel.
Lawsuits are prohibited. However, an insurance company and policyholder could, by agreement, opt out of an assessment.
Most Americans are not so naive as to believe politicians and officials when they say, "trust us, we are from the government." One very experienced expert in this matter expressed similar skepticism over the legislation:
Robert Hunter of the Consumer Federation of America, who once headed NFIP and served as Texas insurance commissioner, said: “You do all these calculations, you still have a specific house. There’s no way you could produce an assessment of Hurricane Katrina for every house. I don’t understand how it works. I think there are ways to make it work, but it’s not in the bill.”
I agree. Surprisingly, many insurance executives also agree with Robert Hunter, as noted in Senate Flood-Program Extension Bill Takes On Wind-Vs.-Water Issue:
But officials of the National Association of Mutual Insurance Companies (NAMIC) voiced concerns. “We appreciate Sen. Wicker’s willingness to address this complicated issue and look forward to working with him to find a solution that works for everyone,” says Matt Gannon, assistant vice president of federal affairs for NAMIC. “However, we have some concerns that his plan could cause more confusion for insurers and consumers in the aftermath of a major flood.”
Slabbed also expressed a similar opinion:
After reading the entire bill and Senator Wicker’s FAQ sheet I’ll say I was underwhelmed. Don’t get me wrong I greatly appreciate the fact that Wicker is the only national politician in Mississippi that gives a shit about the coastal insurance crisis. I just don’t think using concepts based on MID Commish Mike Chaney throwaway lines advances the cause of true NFIP reforms much and I agree with former Texas Commish Robert Hunter who thinks Wicker’s proposal is unworkable in practice…
Interestingly, it has been reported that this wind versus water legislation was based upon proposals by a non-profit organization with strong ties to the tobacco industry and far right-wingers, The Heartland Institute. As stated in a press release by that organization:
The Heartland Institute today praised Sen. Roger Wicker’s (R-MS) introduction of the Consumer Option for an Alternative System To Allocate Losses Act of 2011, or COASTAL Act. The bill (S. 1091) is based on a proposal developed by Heartland Institute policy advisor Scott Richardson, a former South Carolina insurance commissioner.
In Are We Doomed To Repeat This Again?, I noted:
I met with Gene Taylor, a United States Representative from Bay St. Louis, Mississippi, in early 2007 regarding this problem. Hurricane Katrina destroyed his home and those of friends. He understood that coastal policyholders with complete destruction were only getting the flood damage paid for under the coverage purchased through the National Flood Program. Despite homes miles inland being paid significant benefits under their all risk coverage from wind damage, coastal insureds suffering from a combination of wind and flood were generally getting paid pennies on the dollar for wind related damage. He and other coastal Representatives believe that the only solution available is to make available a policy that covers both the water and wind perils which occur during a hurricane.
As I previously stated, the Senate voted against such coverage. The experience of Gene Taylor is accurate. I often indicated that it was easy to determine the State Farm adjusters working the policies issued under the National Flood Program versus State Farm’s own policies. The State Farm flood adjusters were the ones dressed in red coats with very long white beards, freely giving money away. The State Farm company adjusters dressed like funeral directors with much sympathy, but little that would really help you out of your predicament. Some in the industry may think this is a "cheap shot" taken at State Farm. However, I had discussions with management at National Flood about this, and they indicated they were instructing adjusters to act in "good faith" and "give the benefit of the doubt" to the unfortunate flood policyholders regardless of whether the private carriers were just going to pay lip service to that very basic good faith claims handling philosophy when faced with the wind related claims.
Most people not in the insurance business wonder why they cannot simply get one policy to cover everything caused by a hurricane and have the carrier treat them in good faith. It is hard to explain why we can do so much in society and fail to make a working product available to so many that want and need it….
Maybe that insurance product will exist one day.