Something like 38 stories on this development showed up in my feedreader last night. If you remember, the Department of Homeland Security is supposed to report to Congress regarding claims made by some politicians that insurers used the National Flood Insurance Program to benefit themselves at the expense of taxpayers. As this theory goes, insurers pushed through flood payments to policyholders — using federal funds — so insurers would have less potential wind damage to cover.
When you consider who has been pushing this line of thinking: Rep. Gene Taylor, Mississippi AG Hood, policyholder attorneys — it fits too neatly into their story line that insurers behaved as some sort of 21st Century barbarians, descending on the Gulf Coast like Genseric the Vandal sacking Rome. Logically, the argument has never made any sense to me, because those pushing the argument ignore a corollary part of it: who applied for the flood insurance payments in the first place? That’s right, the policyholders. You can’t say insurers are ripping off the taxpayers unless you say policyholders are ripping off the taxpayers. This argument also went through a strange permutation that tended to reveal its internal inconsistencies even more: some policyholder lawyers began to argue that you can actually have a double recovery from multiple indemnity sources to arrive at a total greater than the value of the insured property. What’s wrong with this? Both arguments are result-oriented and focus on getting more money into policyholders’ hands, without making an effort to resolve weak or contradictory legs of the argument. You can debate that result as a matter of public policy, but saying you want the result does not mean the argument makes sense.