The time to address public policy regarding natural catastrophe preparedness and recovery in the wake of Tropical Cyclone Sandy is now, according to the National Association of Professional Insurance Agents (PIA).
"There may be a temptation to postpone action on efforts to improve our public policies designed to prepare for, recover from and mitigate natural disaster losses from future storms - but we shouldn't wait," said PIA National President Andrew C. Harris. "Our recent experiences with Tropical Cyclone Sandy illustrate how destructive natural disasters are and that adequate preparation can help save lives and property. Independent insurance agents are on the front lines during these disasters, guiding consumers through very difficult times. We see the direct results of our preparedness efforts, or lack of them, first-hand."
Harris experienced the full brunt of Sandy. His insurance agency is located in Millstone Township, New Jersey. Harris operated his business for seven days without power, using a generator, enabling him to process claims and serve clients by relying on his emergency disaster plan, which worked. "The key to our recovery and our ability to help others recover can be summed up with one word: preparedness," he said.
"Take it from me, it is not too early to begin preparing for the next big storm, because there will be many of them," Harris said.
In an effort to assist our policymakers with their decisions, PIA National has formulated and recommended catastrophe related public policies we believe will go a long way in helping restore distressed private insurance markets, while also helping protect lives and property through common sense mitigation initiatives.
After close examination of the many proposals addressing catastrophe preparation, mitigation and recovery, the PIA National Natural Catastrophe Working Group proposed a resolution stating the association's position that was approved unanimously by the PIA National Board of Directors at their annual meeting on September 23, 2012 in Baltimore, Maryland. The policy proposes:
A well coordinated national system of catastrophe preparedness--one that would include strong state planning and response; implementation of mitigation efforts, such as effective statewide building codes and thoughtful land-use policies; and innovative initiatives designed to increase capacity to insure risk, as needed.
Tax laws to allow insurers to prepare for disasters by allowing them to build up adequate reserves in a tax friendly manner; these could include allowing insurers to offer more premium discounts for mitigation efforts. PIA members strongly believe that any suitable catastrophe plan must place primary responsibility on the private markets, so as not to create too much of a burden for the taxpayer.
In addition to helping insurers build up reserves in a tax friendly manner, the federal government should not subsidize new property development in catastrophe prone areas.
Programs should focus on helping people manage their risk, for example: extending tax credits, loans and grants for measures designed to protect the property from natural disasters - rather than for programs designed to support artificially low insurance rates. Such assistance should be means-based, and focus on low and fixed income residents - not high-income individuals with expensive beachfront or vacation homes.
PIA supports strong building codes that are adapted to the particular risk. Properties in coastal areas, fault zones and other high-hazard areas, should be built, replaced or repaired according to the most modern building standards and codes, reflecting exposure to natural disasters and effective loss-reduction measures.
"PIA members support the role of the states as the primary regulators of insurance and therefore most of our recommendations are to state governments," said Jimmy C. Beathard, chairman of the PIA National Natural Catastrophe Working Group. "However, we recognize the critical role of the federal government in disaster preparedness and recovery. In addition to helping insurers build up reserves in a tax friendly manner, the federal government should not subsidize new property development in catastrophe prone areas.
"We support federal efforts to coordinate disaster response and enhance mitigation, but cannot support any proposals that would transfer risk from the private market to taxpayers," Beathard added.
The working group that drafted the series of proposals consists of independent insurance agents from across the country that make recommendations regarding natural catastrophe policy. This working group reached out many different stakeholders in the community including state and local officials, carrier representatives, reinsurers, environmental groups and many others.
PIA's experience with catastrophes included 2005's Hurricane Katrina, which devastated the Gulf Coast of the United States. PIA National Vice President/Treasurer Richard A. "Richie" Clements, an independent insurance agent in Chalmette, Louisiana was motivated by personal experience to specialize in catastrophe public policy. Since Katrina, he has become PIA National's representative to FEMA, the National Flood Insurance Program (NFIP) and the Flood Insurance Producers National Committee (FIPNC).
"People sometimes ask me why I'm so adamant about selling flood insurance," Clements wrote in an article published in March 2012. "If you've ever been through a Katrina or a Betsy and been lucky enough to live to tell about it, then you know why. There's nothing like losing your home to flooding to concentrate your attention. I know from unfortunate personal experience."
"The thinking that we have to counter is 'it can't happen to me,'" Clements said. "Take it from me, it can, it does and it did. People in 'low-risk' areas of the country like New York have discovered they can lose their homes to flooding from hurricanes, too."