Storm Brews Over Adding Wind Coverage to Federal Flood Program

Industries fight government all the time, but not usually over which of them can run an actual business.

But that's all changed when it comes to, of all things, wind.

Congress is seriously considering taking insurance coverage for wind damage away from private insurers. Lobbyists for the industry are battling to keep the business where it is.

The tug of war began in 2005 with Hurricane Katrina, which destroyed the homes of Rep. Gene Taylor (D) and some of his relatives and friends in Bay St. Louis, Miss. Taylor was and remains irate that he and others were compensated only for flood damage and not -- until they sued -- for the ravages of wind.

The result was tremendous personal hardship and federal expense. The government spent billions that Taylor says insurance companies should have paid to assist and relocate families. "It was unjust at every level -- for the individual and for society as a whole," he said. "Insurance companies tried to screw the nation."

Taylor wrote legislation that would add wind damage to the flood coverage that is already underwritten by the federal government. His proposal passed the House of Representatives last year as part of a broad renewal of the soon-to-expire National Flood Insurance Program. The plan, which is backed by Gulf-state lawmakers and House Democratic leaders, is pending in the Senate.

But there the Property Casualty Insurers Association of America is leading other insurance lobbies in an effort, so far unsuccessful, to blow away the wind provision. The Senate Banking Committee, at the urging of the Bush administration, did not add wind coverage and other enhancements

Taylor wanted to the flood insurance program.

The insurance industry is a powerful force. In the current election, finance and insurance companies' political action committees are the largest givers (other than labor PACs) to federal candidates, according to the nonpartisan CQ MoneyLine. The industries also rank second to health care in spending on lobbyists.

Faced with its fight over wind insurance, the property-casualty group is likely to hire even more lobbyists and to buy ads. "We are taking our case to the Senate in particular and highlighting the fact that adding wind coverage is unnecessary," said Paul M. Kangas, the group's top flood insurance lobbyist. "It's an integral part of a basic homeowners policy. To have the government step in where the private market is already is contrary to common sense."

The insurers have also attracted some surprising allies. The National Wildlife Federation and the Consumer Federation of America testified that they oppose adding wind coverage to the flood program because the expansion would, among other things, undermine the program's already precarious finances.

Taylor dismisses that complaint because his bill requires the wind insurance to be actuarially sound and thus theoretically cost-free for the government. The insurance lobby doubts that, and it may get its way in the end.