Washington, D.C. - The Council for Citizens Against Government Waste (CCAGW) released the following excerpts of the statement of CCAGW President Tom Schatz submitted to the House Joint Subcommittee on Housing and Community Opportunity and Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises regarding H.R. 3355, the Homeowners’ Defense Act of 2007:

This hearing on H.R. 3355 is an opportunity for Congress to decide whether to expand the role of the government in disaster insurance coverage or to step back and allow the private sector to assist homeowners who suffer damage.

H.R. 3355 provides the wrong solution.  By increasing the availability of state-sponsored insurance funds and exposing taxpayers to massive costs, it would follow the expensive and unworkable precedent set by the expansion of authority established in January, 2007, for Florida’s Citizens Property Insurance Corporation.  That company now competes with the private sector for primary insurance coverage, not just as an insurer of last resort.

On April 20, The Wall Street Journal called the expansion of authority for Citizens an “exercise in Cuban economics [that] is already gutting Florida’s once-competitive insurance market.”  In fact, private insurers are leaving the state, canceling policies, and restricting the issuance of new policies. 

Under H.R. 3355, the government would be usurping the marketplace and acting as a primary insurer.  Rather than encouraging prudent behavior and pricing insurance according to risk, the implicit taxpayer guarantee would lead to more imprudent building of homes in disaster-prone locations with little concern about the cost of rebuilding.  That may not be risky for the homeowner, but it is extremely risky for taxpayers.

In his report “Coastal Disaster Insurance in the Era of Global Warming: The Case for Relying on the Private Market,” Justin R. Pidot, a Fellow at the Georgetown Environmental Law and Policy Institute, … suggests, and CCAGW agrees, that “the best federal policy appears to be the one that does the least, that is, that largely leaves the business of providing insurance for hurricanes and other coastal storms to the private sector.  Private insurance companies can generally provide appropriate coverage for the risks of property damage associated with hurricanes and other coastal storms while providing consumers with reasonably accurate price signals about the dangers of building, living, and operating businesses in hazardous areas.”

H.R. 3355 would encourage risky behavior and shift responsibility for poor decisions to the taxpayers.  Congress should get out of the way of the private insurance markets.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.