Insurance Quotes & Advice

With the start of hurricane season, Congress has been debating a measure to create a national catastrophe fund that would provide a cheaper reinsurance option to companies than the private market.

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.

Currently Florida is the only state with it’s own reinsurance fund.  Having some of the highest property insurance rates in the nation, the fund was supposed to save consumers money.  However, last year the state got locked into a bitter dispute with carriers over proposed rate increases after it’s legislature expanded the state’s Hurricane Catastrophe Fund.

So if that national fund is supposed to work the same way, how is that supposed to help consumers?  Insurance companies will probably save millions on reinsurance but will be reluctant to pass on those savings unless forced to by regulators.

This measure would pass on potential liabilities to taxpayers that should be rightly held by private entities.  While some would liken this to the National Flood Insurance Program which left taxpayers on the hook for $17 billion, there is one major difference.  Unlike flood insurance which pretty much nobody offers, insurance companies have numerous reinsurance options from the private marketplace.

If Congress wants to nationalize any kind of insurance they should start with healthcare, at least then everyone would benefit as oppossed to the few select coastal states with a national reinsurance fund.