The Insure Act will be coming to Congress

Part 1

The birth of the INSURE ACT:

Since Adam Schiff has now been elected as the new United States Senator from California, the bill that he introduced to Congress, when he was in the House of Representatives, is expected to be reviewed as soon as possible and put before Congress for a vote. The bill in question is known as the Incorporating National Support for Unprecedented Risks and Emergencies Act, otherwise known as the INSURE ACT.

WHAT SENATOR-ELECT SCHIFF WANTS

THE TREASURY DEPARTMENT TO DO:

On the very first page of the bill, the following is stated as to what the requirements are for the Treasury Department:

“To require the Secretary of the Treasury to establish a catastrophic property loss reinsurance program, and for other purposes.”

Background of the INSURE ACT:

The INSURE ACT should not be taken lightly, for this bill deals with a restructuring of the catastrophe insurance programs now in place and will turn the United States Treasury Department into one of the largest reinsurance providers in the world, but before we pass judgment, let's examine what the bill states. The following is found on Page 2 of the bill on lines 3-8:

“The Secretary of the Treasury shall, not later than 4 years after the date of the enactment of this section, establish a catastrophic property loss reinsurance program (in this Act referred to as the ‘‘Program’’) to provide reinsurance for qualifying primary insurance companies.”

What is reinsurance?

Reinsurance can best be defined as insurance for insurance companies. Reinsurance is sold to Property and Casualty companies by reinsurance companies to provide financial assistance for catastrophic claims. It reduces the net amount that is owed on insured losses and provides protection from large catastrophic occurrences.

The intention of the INSURE ACT would be to provide a financial assistance fund for independently owned and privately managed reinsurance companies that are on financially shaky ground due to the large number of hurricanes and fires that have plagued this country in the last year.

One of the important parts of reinsurance, or any type of insurance offered for protection of property, is how coverage for a claim is determined. Most analysis of coverage will stick to the policy terms and conditions.

The Treasury Department sets the policy terms:

However, what comes next in the bill begins to make me uneasy. This is found on lines 22-25 of Page 3 of the ACT, which states:

“CONSULTATION.—The Secretary may contract with reinsurance brokers and consultants to assist the Secretary in the design and management of the Program.”

My only question concerning this part of the ACT is what does the Treasury Department know about determining what is covered and what is not covered, and how the claims being made can be analyzed for coverage or denial, as well as when to look for assistance from someone you are putting out of a job.

When a reinsurance carrier becomes involved in the investigation and evaluation of a claim, it is typically the result of a catastrophic loss event. The request for payments which the property insurance company’s adjuster will file is not only reviewed by the company which sold the policy but will be sent to the reinsurance carrier for their review as well.

As far as the “management” referenced in line 25 of the Act, this is where a critical evaluation by a claims professional is required.

The following describes another unnecessary action of The Act, and it concerns the abolishment of the National Flood Insurance Program. Please refer to Page 3 lines 18-24 which state:

“NATIONAL FLOOD INSURANCE PROGRAM DISCONTINUATION.—On the date that the Secretary begins operating the Program with respect to the peril of flood, the Administrator of the Federal Emergency Management Agency shall— (1) discontinue the issuance and renewal of policies under the national flood insurance program.”

For decades, the National Flood Program responded with expertise based upon experience in dealing with the analyzing of flood coverage and the ability to reimburse for covered repairs. Basically what I am saying is that it is a program that has been working and now the INSURE Act will demolish it and put it into the hands of a department that specializes in collecting your tax money.

Please note that I will be following up with additional articles which explain the act and the problems it will create.

Respectfully,

Norman Lambe

nwlambe@gmail.com