"WASHINGTON -- As hurricane season begins, Democrats in Congress want to nationalize a chunk of the insurance business that covers major storm-damage claims.
The proposal -- backed by giant insurers Allstate Corp. and State Farm Mutual Automobile Insurance Co., as well as Florida lawmakers -- focuses on "reinsurance," the policies bought by insurers themselves to protect against catastrophic losses. The proposal envisions a taxpayer-financed reinsurance program covering all 50 states, which would essentially backstop the giant insurers in case of disaster.
To gin up national attention for the program, Allstate and State Farm have teamed up with the American Red Cross in an advocacy group, ProtectingAmerica.org, pushing for better emergency preparedness, providing disaster news and education to prevent lawsuits. The group also pushes for the federal program.
Red Cross says it didn't lobby for the federal bill, and doesn't take a position on it. Its interest in ProtectingAmerica is solely to encourage preparedness, it says.
The proposed plan is roughly analogous to the National Flood Insurance Program, which has been criticized for encouraging construction in risky floodplains. Nevertheless, in recent weeks the Senate voted to renew the flood-insurance program, and also to forgive $17 billion in debt incurred after Hurricane Katrina.
Critics cite that debt forgiveness as an example of how states with little or no hurricane risk can end up footing the bill for damage in flood-prone areas. "For years, federal flood-insurance backers told us the program was financially sound, but the storms of 2005 left it $17 billion in the hole," said Steve Ellis of nonpartisan budget watchdog Taxpayers for Common Sense.
"I'm calling on the voters in both parties to demand that the nominee of their party publicly support a national disaster fund," said Florida state Sen. Steven Geller, an uncommitted Democratic superdelegate. "If they won't, vote for the other party."
Republican presidential candidate Sen. John McCain, who badly wants to win Florida, is resisting calls to back the program. "This is a very large federal program," and the only state currently in a position to benefit is Florida, said Douglas Holtz-Eakin, Mr. McCain's policy director.
Sen. Clinton received $1.5 million from individuals in the insurance industry during the 2008 campaign cycle. She received $10,000 from Allstate employees, and $12,550 from State Farm, according to the Center for Responsive Politics. Mr. Obama received $960,000 from individuals in the industry. Employees from Allstate and State Farm, both based in Mr. Obama's home state, gave him $25,000 and $35,600, respectively.
Mr. McCain, who opposed the federal catastrophe plan, received $690,000 from individuals in the insurance industry, $9,000 from Allstate employees and $21,000 from employees of State Farm."
Why are the poor decisions made by builders and buyers subsidized by Govt? If you build or buy in a hazzard zone, why should the taxpaers bail you out?