Here is a great post on Sam Friedman’s blog for National Underwriter about the Congressional hearings on insurance practices and Hurricane Katrina. I wrote yesterday about some of the testimony I viewed, and while I didn’t watch more than 45 minutes or so of the hearing, because I have a day job, I did see some of the questioning Sam alludes to. From the standpoint of someone who’s immersed himself in this stuff for some time now, I felt a lot of the questioning was showboating, while some of it was merely foolish and ignorant. I didn’t see hard evidence of alleged wrongdoing, like how insurers supposedly passed off their responsibility to pay wind damage in Mississippi coastal areas by chalking it all up to flood, and then bilking taxpayers by approving flood payments for those with federal flood insurance. I’m certainly willing to consider the hard evidence if and when I see it.
I did see this testimony by Rep. Gene Taylor of Mississippi. Regrettably, I have to report that I don’t consider Rep. Taylor’s statements extremely credible, not only because he is a self-interested party who sued over allegedly owed and unpaid Katrina damage to his home, but because of statements like this from the October 20, 2005 hearing of the House Financial Services Committee:
"We, as a Congress, could say to the insurance companies, ‘That was wind-driven water, that 8 inches of rain don’t cause a 30-foot flood of water, and you are going to honor those insurance claims.’ I’m not so sure my colleagues are willing to do that." (See page 14, second full paragraph of this pdf).
So Congress can order a particular interpretation of insurance contracts? That’s a new one. If someone believes that, I can see they could believe just about anything. But maybe Rep. Taylor is right this time, we’ll see what evidence is brought forward when the Department of Homeland Security makes its report to Congress on April 1. One thing is for sure, if insurers have been looting the federal Treasury, Congress is doing to be upset — they can’t stand the competition.