Mr. Chairman, I thank the gentlewoman for yielding the time, and I want to talk a little bit about my own background. I was in the insurance business for 13 years, worked strictly on commission. I was a broker, which meant I worked for the…
Mr. Chairman, I thank the gentlewoman for yielding the time, and I want to talk a little bit about my own background.
I was in the insurance business for 13 years, worked strictly on commission. I was a broker, which meant I worked for the buyer, helping them find the best quality insurance in the insurance marketplace. I also represent the entire coast of the State of Georgia. I've been involved in flood insurance and wind storm insurance and fire insurance a great deal of my adult life. So I'm very familiar with this. In fact, I'm the only CPCU in Congress, which means Charter Property and Casualty Underwriter. That's a professional designation. I know this stuff is my point.
Now, what you have with the insurance business is you have two types of profits, one they make from underwriting. They don't want to insure a building if they know it's going to burn down because they won't make an underwrite profit. Fair game. They do everything they can to make sure the building does not burn down.
They also make a second kind of profit called investment profit. When they get the cash flow from premiums from underwriting, they invest it and they make a lot of money in that. But generally speaking, insurance companies are risk averse. They don't want to insure wind if you're on the coast. They don't want to insure flood if you're in a flood zone. It makes sense from a business standpoint.
But as they will gladly cede this to the Federal Government, then what happens is exactly what Mr. McHenry said: you have the private sector pulls out of it. They don't put in their ingenuity to it.
Now my friend Mr. Taylor, and I know having represented coastal areas, it is possible that there are a lot of buildings and homes that have been constructed that probably shouldn't be there or probably shouldn't use the construction standards that they should, I know as I go over the entire district of Georgia on the coast that people in Idaho and Iowa and Maine are subsidizing the flood policies for my homeowners out there.
It's hard to say this is politically unpopular, but it is the truth. I just want to say that the insurance companies need to own up to their social responsibility. They don't need to take a walk on this.
The Federal Government is already supplying health care, retirement benefits, transportation benefits, food, drugs, even school uniforms and babysitting. Yes, there are programs for that. I don't believe the Federal Government needs to get into the wind storm pool in a major way. We need to let the private sector continue to provide this service, and we need to look ourselves in the eye and say maybe not all these buildings should be built.
I urge a ``no'' vote on this.
Mr. Chairman, will the gentleman yield?
If they want to make a profit from it, then we should not let them take a walk from it. They will figure out a way to do it.
Keep in mind, we did not even have a flood program until recent times. The underwriter will take care of it.
Let me say this, we were not in the Federal flood insurance program until recent times.
Case in point, I used to sell flood insurance; but when the Federal Government grew into it, the private sector withdrew from the market.
Let me say this, I would love to continue this dialogue and that's why we wanted some amendments so that we could try to work out some of these differences.
But in your great State, in Massachusetts, in Boston or in Savannah, Georgia, historically very old communities, there weren't Federal programs that did the underwriting. These were all built by the private sector.
What I'm saying is if you just step back and let the market do its place, the market will continue to work wonders as it did for hundreds of years in the United States of America until the Federal Government let them start taking a walk by providing products that competed with the private sector.
Mr. Chairman, will the gentleman yield?
Because as I understand it, Trent Lott lost a family home that was like 100 years old or something in Mississippi. There was no Federal insurance program of any nature when that house was built, which is my point for Boston and for Savannah, Georgia. All of those old buildings never had any Federal insurance programs: fire, flood or windstorm or anything else.
And what I'm saying is I agree with you. They are not pleasant to work with, and I understand and I want to commend the gentleman for his great work on this. But the reality is, if the Federal Government steps in, the private sector will move out.
I thank the gentlewoman for yielding and I thank my friend from Massachusetts for generously yielding time, and I want to speak about the manager's amendment. Now that I have done that, I want to talk about Public Law 15.
Public Law 15, or the McCarran-Ferguson Act, says that the States will be in charge of insurance, not the Federal Government.
Therefore, when a company comes into a State or tries to leave a State, the State insurance commissioner actually has the opportunity to twist an arm and say, if you are going to come into my State, you have to write a certain amount of coastal property, a certain mix of teenage drivers, a certain mix of elderly people for health care or whatever. State insurance commissioners by Public Law 15, the McCarran-Ferguson Act, are very powerful in the insurance business.
So I want to say that is where my philosophy comes from is that I do strongly believe that the States can twist arms and get a lot more done.
But I just want to say that Federal flood fund insurance companies did not start until 1968; yet, we have historic properties all over the coast of America because the private sector was there. And, again, having sold flood insurance through a private insurance company, I know that it is possible. And I don't know if the gentleman needs some time. I will be happy to yield, because it is your amendment.
Reclaiming the time. I do believe that you have set a great message, and Mr. Taylor is a tireless advocate for coastal property. But at the same time, I do think that the McCarran-Ferguson Act gives the State insurance commissioners a pretty big hammer here which they ought to be using on the head of certain insurance company executives.
Mr. Chairman, maybe somebody in the majority party could clarify something for me. Does this apply to the wind coverage? Does the gentleman, author of the legislation, know? Does this apply to the wind storm coverage? Does this amendment apply to wind storm?
Does it apply to the wind storm policy? And here's why I'm asking: as I understand it, we're talking about a multi-peril policy that would have flood and wind. And a mortgagee, or a bank, the lender is going to require you to carry flood insurance. Therefore, you go out in the market, well, it won't be the market. You go to Uncle Sugar, I mean Uncle Sam, and you say, I want to get this policy and you're going to get the flood care, but they're also going to sell you the wind storm as part of it.
So is it your intent for people who are in this floodplain area to also get a discount on their wind storm coverage?
Well, if the gentleman will let me ask, and I'll yield back to you, but where in your policy does it say they won't get the discount on the wind coverage? Because I understand what you're doing on the flood. But it appears that wind is going to be in this package. I don't see how we divide it out.
But am I correct that when my lender requires me to carry the flood insurance, then I'm also going to FEMA for the wind storm insurance?
Would they have to be in the amendment?
Mr. Cardoza said it was silent on it, which it sounds like. From what you just read, that's correct. Wouldn't it have to proactively exclude the discount for wind? I'm just asking.
Maybe if Mr. Frank could finish that sentence.
But in a multi-peril policy, you're only getting one premium.
Mr. Chairman, I just want to say I'm confused here. This is opening up the floodgates for coastal development. Whom are we fooling here? As a matter of fact, I just understood that U.S. PIRG and a lot of pro-environmental groups are opposing this. It puts me on an odd side of things. But whom are we kidding? This is all about coastal development. And don't say, when you're knocking over the marshland, don't touch that sand dune. If you're serious about sand dunes, if you're serious about the wetlands, if you're serious about the environment, the fragile coastal environment, you will oppose this bill. This is the best thing in the world for developers. In fact, I'm a little bit surprised that developers aren't knocking down the doors and saying to fiscal conservatives who are opposing the bill for that, what are you doing? This is the best thing.
The great State of Florida, where I have vacationed and so many other people do, we all love the State of Florida and its natural environment. But, goodness gracious, Carl Hiaasen wrote the book ``Strip Tease.'' I mean, there's book after book about overdevelopment in Florida.
That is all this whole bill does is allow continued overdevelopment in the coastal area of Florida and other environmental areas. So to have a fig leaf here to say, well, don't worry, FEMA is going to worry about that sand dune and those sea oats in the coastal area, that's a very mixed signal.
Let me yield to my friend from Massachusetts, who I am sure has some great wisdom for this confused guy.
Mr. Chairman, I reclaim my time.
I want to say to Mr. Frank, do you not agree with me that this is the greatest development bill there is?
Let me restate. Right now it is a fact homeowners and lenders are having trouble getting flood insurance and windstorm insurance in the areas where there are lots of floods and lots of windstorms, coastal areas. This allows them to get it at an economic price that is a lot lower than the private sector because it's a government subsidy. Therefore, America, being great entrepreneurs, this is a very pro-growth, pro-development amendment. I cannot understand how you would not agree with that.
I yield to the gentleman.
Let me reclaim my time just to bite on that piece of the apple.
Reclaiming my time, Mr. Chairman, let me say this. We just passed an amendment for people who have to buy insurance. They don't have to buy insurance. They can move. If they are living in areas that are susceptible to flood, this is still a free America. They can move on. So we are encouraging them to move into flood areas and windstorm areas that are critical environmental areas.
Yes.
Reclaiming my time, Mr. Chairman, just to emphasize this point. This creates a stable predictability in the insurance premium by the homeowner and developer. Therefore, it makes it easier to develop in a coastal area.
Listen, I understand what you are doing, but I just think this fig leaf of an amendment saying let's protect the environment is a little bit silly because the entire point of the bill disregards the environment.
I want to say to my friend, I actually think that you're feeling around the right part of the woods on this stuff. This is actually an important amendment; but I, like the gentlewoman from West Virginia, really doubt FEMA's expertise in solving this problem. And I hope that during the legislative process of this you can maybe shore up the language to say that they ought to have somebody with a lot better scientific and organizational mind than they would be in this. I mean, I keep thinking FEMA-Katrina, not a good idea to let them study anything. In fact, there are a whole slew of amendments here that probably won't be speaking of, but it gives FEMA instructions and directions to do this and that. I don't have the faith in FEMA which your side apparently does. I think this is like asking the post office to do an efficiency study; it's just not a good idea.
But I do believe that you should put in there something about rising tides because you don't have anything about tidal levels. In the State of Georgia, we have a 7-foot tide, Florida has about a 1- or 2-foot tide. That stuff all makes a difference.
I want to say to my friend, again, I support what you're after; I think this is a serious amendment. But when you say this information is out there, FEMA can get it, it was also well known that people were in the Superdome, but FEMA had trouble figuring that out and what to do about it. So just keep in mind who you're giving this authority to. But I do want to say to the gentleman, I understand what you're after, and I think it's important.