WASHINGTON, D.C. – The Heartland Institute today praised Sen. Roger Wicker’s (R-MS) introduction of the Consumer Option for an Alternative System To Allocate Losses Act of 2011, or COASTAL Act. The bill (S. 1091) is based on a proposal developed by Heartland Institute policy advisor Scott Richardson, a former South Carolina insurance commissioner. It would create a “standardized loss allocation” system to distribute losses between the National Flood Insurance Program and private or residual-market-provided wind insurance following the total loss of any property that carries both flood and wind insurance.
Currently, when all or almost all of a building’s aboveground portion is destroyed, consumers, insurers, and the National Flood Insurance Program have a difficult time deciding who should pay losses. Many disputes end up in court. Wicker’s bill would establish a voluntary system, based on storm models developed by the National Oceanic and Atmospheric Administration, that would allocate losses between various parties based on a formula. Policyholders suffering a total loss of their homes would receive assurance of payment up to policy limits, and wind insurers would know that few if any losses would be attributed to wind alone and that avenues for legal challenges to the claims determined under the model would be limited.
“The fundamental idea in this bill solves one of the major quandaries facing the nation’s current coastal insurance system,” said Eli Lehrer, The Heartland Institute’s vice president for Washington, D.C., operations. “The current haphazard system for allocating claims between NFIP and wind insurers often leaves everyone involved worse off. This bill holds out the possibility of developing a fair, equitable system that serves everyone’s interest. It’s not perfect, but given that the system proposed is optional and will not require a meaningful commitment of tax dollars, it certainly seems like a worthwhile experiment.”
Lehrer can be reached at 202-615-0586 or [email protected].
The Heartland Institute is a 27-year-old national nonprofit organization with offices in Chicago and Washington, DC. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site at http://www.heartland.org or call 312/377-4000.