Disaster Insurance: The Job Is Too Big for the States : Homeowners across U.S. should press for federal program
Many homeowners from Maine to the Gulf of Mexico are finding it hard to get insurance this year because they live in areas recently battered by hurricanes. Sound familiar? California homeowners face a similar problem because insurers do not want to take on the risk of providing earthquake coverage.
Natural disasters have spooked America’s private insurers, and efforts of the states to provide alternative coverage may turn out to be disasters themselves, financially. The clean and obvious solution would be a national disaster insurance program. Attempts to put one together in the last congressional session failed. Beleaguered homeowners deserve another try when Congress reconvenes.
Whether it’s floods, quakes, twisters, droughts or hurricanes, few Americans are spared natural disasters. The problem requires a national solution, not unlike the Superfund, the federal program for cleaning up toxic dumps.
Insurance firms have taken huge hits in this decade. Hurricane Andrew ravaged Florida to the tune of $15.5 billion in 1992. The 1994 Northridge earthquake cost the industry $14.5 billion. The reactions of the industry were predictable. When times are bad in a market, insurers get out. Sales of new homeowner and earthquake policies have plummeted.
Efforts by states to address the problem are insufficient. Sacramento, for example, created the California Earthquake Authority to relieve the load on private insurers to encourage them to keep selling policies in the state. But the CEA is already proving problematic. Its rates, released last week, are strikingly disparate across California, depending where applicants live and the age of their homes. Premiums for some areas known as earthquake risks are less than those for areas considered lesser risks. Even Gov. Pete Wilson is raising concerns.
Meanwhile, the Nationwide Insurance Co, the fifth-largest U.S. home insurer, is sharply curbing policies in the coastal areas of the hurricane belt. It has virtually stopped selling policies in Florida, where policies already were difficult to obtain.
Agencies like the new Earthquake Authority, in whatever state they might be established, probably would not be able to fully cover all claims in some massive natural disasters. From shaky California to the wind-lashed Gulf of Mexico and Tornado Alley, Americans should step forward to embrace a national plan to save the value of their homes. Who said Mother Nature was nice?
