As the residents of Kansas City and hundreds of other Midwest communities ravaged by floods this week slogged through cleanup efforts, officials at the Housing and Urban Development Department and the Federal Insurance Administration continued their eleventh hour efforts to work out a revised national flood insurance program.
The troubled program, which was due to expire on June 30, was extended through Sept. 30 by Congress in order to give the two agencies time to find new private sector operators. Since its inception in 1973, the program has been operated by a consortium of 132 insurance companies, the National Flood Insurers Association.
Persistent "consumer protection" and computer problems of the NFIA program created policy and administrative difficulties for FIA and HUD, according to J. Robert Hunter Jr., acting FIA administrator. And after many attempts to negotiate with NFIA to correct the abuses, regulations governing the program's operation were adopted in August 1976.
The regulations did not resolve the problems. Hunter said in an interview yesterday. "We were really concerned with NFIA's attitudes," he said, "Expecially their attitudes toward consumer protection on the one hand and the taxpayer on the other."
He cited several disputes between NFIA and the government on policy interpretations. The insurers did not want to pay policyholders for the cost of moving their goods out of the way of floodwaters, while FIA and HUD said they'd rather pay the small amount to move the goods rather than pay much higher claims for goods destroyed by floodwaters.
NFIA has reportedly made $2.7 million in profits on its contract with HUD.
Hunter said aoubt 98 per cent, or 16,000 of the 20,000 of the floodprone persons currently eligible for the insurance program are now insured.
When the program is completely operable in 1983, residents in aobut 19,000 communities around the U.S. will be eligible for insurance under the plan.
Prior to the program's inception, insurance companies did not offer flood insurance for any but its largest commercial customers.The federal government decided it would be cheaper to offer residents of floor-plain areas insurance than to sit and wait for disaster to hit.
Prior to 1973, for instance, the residents of Kansas City would have had to bear the losses from floods like the one that hit this week themselves.
THe most persistent and vehement critic of the flood insurance program has been Sen. Thomas F. Eagleton (D-Mo.). Ironically, it is his constituents who live near the banks of the Missouri River, which frequently overruns its banks, who have been among the primary beneficiaries of the program.
More than 13 differnet companies, including insurers, computer organizations and accountancy firms have indicated interest in bidding to operate the revised insurance program. The deadline for bids is Sept. 23. Under the stringent contract specifications written by HUD under its new secretary, Patricia Roberts Harris, the contractor will be just a fiscal agent taking no risk. Under the first contract, NFIA members pledged up to $48 million of their funds as a reserve against losses.
Hunter said the task of finding a new contractor and making a transition to a new computer system may take several months, but congress has provided for several more extensions of the old contract should they prove necessary.
"I may have to use some baling wire to hold the program together" Hunter said. "But we'll make sure that new policies are written, claims are settled and policies are renewed. People don't have to worry that they'll not be covered."