Nationwide Unveils Plan for Unified Multiperil Policy

The scoop goes to the National Underwriter which truly is “the leader in property and casualty news” and you can find their article link here. There are political overtones to the Nationwide plan which also ties into the optional federal charter proposals circulating in Congress. Since Sam got the scoop we start with a quote from the National Underwriter before we move on to the Sun Herald and Times Picayune reports on the subject: (They’re paying attention Nowdy 8) )

Under the proposed coverage, the private insurance market would bear the primary responsibility of paying claims, with the federal government acting as a reinsurer and regulator, said Nationwide.

“Americans need not suffer through a catastrophic event lacking the comprehensive insurance coverage they need,” said Jerry Jurgensen, Nationwide chief executive officer.

“If Hurricane Katrina taught us anything, it is that the market needs a home insurance product that covers flooding as well as wind damage in one policy,” he said in a statement.

The Sun Herald put the related AP story on their front page which included quotes from our friend Brian Martin of Gene Taylor’s office:

Nationwide’s plan, which would require congressional approval, calls for the Columbus, Ohio-based company to sell flood insurance at the same price as NFIP policies. However, policyholders would have the option of buying flood coverage beyond the limits of the national program.

Also, unlike other homeowner rates, prices for Nationwide’s expanded policies would be exempt from state regulation.

Officials from the insurer have briefed more than a dozen members of Congress on the plan but haven’t yet drafted a formal proposal.

“This is without a precedent. There are no precursors to this,” said Craig Zimpher, Nationwide’s vice president for government relations.

“We see this (plan) as a viable alternative to much of the litigation that occurred post-Katrina,” Zimpher said. “No one, whether it’s insurers or consumers, benefits from litigation.”

Rep. Gene Taylor, D-Miss., a fierce critic of the insurance industry’s handling of Katrina claims, is one of the lawmakers who has been briefed on Nationwide’s plan. Brian Martin, Taylor’s policy director, said the proposal could benefit consumers if other insurance companies follow Nationwide’s lead and create a competitive market for flood coverage – a risk private insurance companies traditionally have not wanted to take on.

Martin said the plan should also include federal government regulation and oversight so insurers don’t “cherry pick” policyholders and exclude properties at the greatest risk of flood damage.

“The current system is leaving gaps in coverage,” he said. “There will always be disputes as long as you have wind and flood in separate policies.”

Finally we have the same story from the perspective of our friends in Louisiana. Interestingly Nationwide does not do business in Louisiana but the concept will certainly help there as well. Rebecca Mowbray has the Times Picayune report:

In a sweeping proposal, Nationwide Mutual Insurance Co. has asked Congress to allow private companies to begin selling flood coverage in hopes of getting more people to buy it, reducing the burden on the federal treasury in times of disaster and avoiding disputes over the causes of hurricane damage.

Although the proposal comes as floods are destroying towns across the Midwest where only about 17 percent of homes have flood insurance, the program has its roots in Hurricane Katrina’s watery devastation and the ubiquitous flood versus wind disputes along the Gulf Coast.

Nationwide, which does not do business in Louisiana, said it began working on a proposal for the industry about seven months ago when it realized that customers would prefer to be able to buy everything they need to insure their homes in one place.

“What we’re proposing is that the federal government allow this type of product be sold by private carriers,” said Joe Case, associate vice president for corporate communications at the Columbus, Ohio, company. “This is not just a Nationwide-specific proposal. We’re proposing a new type of product that would be sold across the board.”

The program also comes as a proposal by U.S. Rep. Gene Taylor, D-Miss., to solve the flood versus wind disputes by allowing the flood program to sell wind coverage has faltered, and as the U.S. Department of Treasury has proposed allowing insurance companies the option to be regulated in Washington rather than by the states.

The story continues:

But unlike regular homeowners policies, the new homeowners policies with flood coverage would be regulated by the federal government instead of state insurance commissioners. The flood premiums would be held in a separate account than the regular homeowners money. Insurers wouldn’t profit from the flood premiums, but wouldn’t be taxed on what they collect in flood premiums.

A portion of the flood premium that consumers would pay would go to the federal government to help build a reinsurance fund that would step in if a huge flood exhausted the regular flood premiums that private companies collected. The National Flood Insurance Program would continue to exist, but a flood reinsurance fund to serve the private flood policies would be created alongside it.

The idea is that enough private companies would start offering their own flood policies that the reinsurance program would be more financially viable than the flood program, which went broke after Katrina.

A bill hasn’t yet been drafted on the topic, but Nationwide says it has been circulating its proposal to trade groups. It went public with the idea to solicit comments and refine its ideas.

While the concept has several features that might be controversial, such as the federal regulation and the tax-free accounts, Bob Hartwig, an economist who is president of the Insurance Information Institute, says that isn’t the main idea. “The intent is to increase the ability for communities to recover,” he said.

With this proposal, Nationwide joins other companies in trying to offer solutions to how the country finances disasters. Travelers has pitched a federally regulated coastal wind zone and Allstate is backing the notion of a national catastrophe fund.

“Nationwide believes a higher proportion of people would be able to recover from a flood event,” said Hartwig, whose group doesn’t take positions on specific proposals. “It would avoid wind versus water disputes between customers and their insurers. It would reduce the ultimate payout by the government for disaster relief.”

Nationwide, the country’s fourth largest residential insurer, sells homeowners insurance in every state but Louisiana, Massachusetts, New Jersey and New Mexico. Case could not say why his company does not do business in Louisiana or whether the company is interested in expanding here.