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cane insurance was written by many of the private insurance companies, and nearly all the lenders of money from the point of view of mortgages required that hurricane insurance be written as a part of the mortgage protection on individual properties. As a result of a very wide demand for it, it was comparatively inexpensive and was a great help to us when the hurricanes of the last 2 years hit us, but only on mortgaged property or as individuals had sought to také out the hurricane insurance on their own. It was a required thing by the financial institutions, almost universally speaking, from the point of view of mortgaged property:

When the flood hit, I made inquiries of one industry

Senator Bush. May I ask right there, Governor, if that insurance insured against hurricane damage from flood as well as wind?

Governor HERTER. No; that was one of the very real difficulties. It was straight wind damage.

Senator Bush. Wind damage only?

Governor HERTER. Straight wind damage only. And, of course, it led to a great many difficulties along the shorefront where it was very difficult to ascertain when a house had been washed away whether the wind had blown it down first or the waves had carried it away.

Senator LEHMAN. May I interrupt you? I know that generally speaking your statement is accurate that the insurance companies will not reimburse for flood damage caused by high wind, but is that universal? I am told

Governor HERTER. I cannot tell you. I can only tell you by my own experience.

Senator LEHMAN. I know some insurance companies have recognized claims of that sort. I did not know if you had knowledge of that.

Governor HERTER. No; my impression is if you combined water damage the rate became absolutely prohibitive.

I wanted to cite just one instance of one individual, an industrial concern, that I visited very shortly after the flood and inquired as to whether or not they had taken out any kind of flood damage, waterhazard damage, and they said they had not. The reason they had not was that the best price they could get on it was $785,000 a year, an absolutely prohibitive premium.

So that I despair somewhat in connection with water damage of private insurance companies being able to handle the situation. For that reason I am so glad you are exploring the whole field and the whole possibility of governmental action in the situation.

I hope, however, that it will not be limited entirely to floods, and the reason that I say that is that the hurricane problem seems to be a very real one. The hurricanes may not hit this particular area year after year, but we, of course, have had hurricane experiences running

, from the gulf along the east coast for many, many years, some of large proportions and some of rather minor proportions. It is one of those freaks of nature that we should have had so many disasters in this very short recent period of time.

I do not pose as an expert as to how best the Government can meet this situation. Senators Kennedy and Saltonstall have filed a bill. I would not want to comment on the details of that bill, because I do not feel I am sufficiently qualified. But I do feel very strongly about

one thing, and that is that, if possible, there be some kind of agreement that might be made between the Federal Government and insurance companies, for one primary reason.

As I visualize this picture, if the Federal Government should go into disaster insurance by itself and handle the whole problem, it would have an extraordinarily difficult situation facing it from a point of view of the settling of claims, and from the point of view of the writing of policies, without building up a tremendous bureaucracy, so to speak, of individuals who would be available to take care of it.

We have trained insurance adjusters all over the United States, in every section. We have individuals who I think could be called on when it was necessary to handle a large part of the adjusting end of claims as well as in the writing of policies.

But I am a little puzzled as to how the situation can be handled, because obviously, if disaster insurance is going to be reasonable, and everybody is going to fight it if it is not at a reasonable rate, there has got to be tremendously wide coverage of it.

As I recall the war-disaster insurance, it ran to about a dollar a thousand, and there was almost universal coverage. Everybody said, "It's so cheap, let's take it. We don't know where a bomb will fall or what enemy

actions may cause some particular disaster in our area. Because of the very wide coverage, it became extremely cheap. It seemed to me that that is an all-important factor in this particular situation. From that point of view general disaster coverage-eren though there were regional applications of it and regional differences of rates because of the incidence of disasters in certain areas, which might be a perfectly proper thing without having a universal rate for the whole country, is a very desirable thing.

There is one element in the Kennedy-Saltonstall bill that I think is very important, and that is to start the initial coverage with a requirement that every federally guaranteed mortgage or every mortgage in which the United States Government has any interest should be covered. Then at once you start with that very considerable base that is spread very widely all over the country and gives you the possibility of bringing coverage to a reasonable rate in a comparatively short time. It would give you a very good start right at the beginning.

But, as I say, I am not enough of an expert. I am a little concerned about how the individual insurance companies are going to be able to handle this problem, particularly in areas that are more susceptible to damage than others, which might be their home areas. There are a great many insurance companies, and whether or not they could themselves get wide enough coverage even to make their own participation, even if it was only a part participation in this, a reasonable risk I don't know. The experts coming before you are very much more qualified than I.

Senator LEHMAN. As I interpret your remarks, you doubt whether the insurance companies could on their own account possibly write this insurance without Federal governmental assistance?

Governor HERTER. I do not see how they could. From all I heard, I do not see how they could do it, particularly

Senator LEHMAN. In other words, this does not need to be selfsupporting. It would not be self-supporting, of course.

Governor HERTER. Might I agree entirely with Senator Kennedy that over a period of years it might well become self-supporting.

Senator LEHMAN. Oh, yes.

Governor HERTER. There might be adjustments from year to year in the rates. But, as he pointed out, an initial year might be a very tough one.

Again, I think estimates have been made as to the overall cost of disasters in the country on a year-by-year basis. I think that the Red Cross has estimates of those. I think the Federal Civil Defense Administration has made some investigation of those. On this figure I would hesitate very much to pretend to be an authority, but my recollection is that I saw a figure of roughly a billion and a half being the sum total damage done by all forms of disasters annually in the United States.

Senator Bush. One and a half billion?

Governor HERTER. One and a half billion. That may be an excessive figure, but that is my recollection.

Senator Bush. General Sturgis of the Army engineers has indicated before this committee I believe that the total damages in connection with this year's disaster, meaning beginning August 19, have exceeded that figure.

Governor HERTER. That might well be. This has been a rough year.

Mr. Chairman, I know you have many witnesses here who can testify much more expertly than I. I do want to stress very strongly the fact that we here in Massachusetts have been through a situation which makes it very urgently desirable for a committee of this kind to be giving very intensive study to the problem you are now studying, that we hope will lead to some practical answer that will be of very great benefit to us after the experiences we have been through.

Senator LEHMAN. I want to assure you on one point that you raised that I do not believe it is the thought of any of the sponsors of any of these proposals or of the committee itself in any way to exclude the insurance companies. We want their cooperation. We would like to work through them. As a matter of fact, we believe that it would very greatly simplify it.

But we also recognize that in order to do that the Federal Government, in our opinion at least, must take an active part, and it must accept some risk.

Governor HERTER. I agree with you entirely, Senator. I do not see how that can be avoided, considering the uneven incidence of these disasters. Private insurance companies would never know where the great blow would fall, and unless there was some very strong reinsurance or limit to their liability you might section by section destroy insurance companies one after another if they had to take the full brunt.

Senator LEHMAN. Governor, you and I at different times have attended a good many governors' conferences, and I think they are very valuable indeed. I wonder whether you think that the conference of governors might be moved to take an active part in urging appropriate legislation for disaster risk insurance.

I want to point out that if we do get a number of governors outside of the Northeast area to express their interest in these proposals we would obviously have a far better chance of congressional action.

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I wonder what your thought is on that, sir. Governor HERTER. I think that might well be possible. There again it is a question of the extent of the coverage. If you have in mind general disaster, that is something that can hit any area of the country, whether it be through tornado or earthquake or otherwise, at any time.

One of the curious developments of these freaks of nature has been that these tornadoes have hit areas that never before have been hit by tornado, that earthquakes seem to be developing in very unexpected areas, and certainly that these hurricanes and floods are taking erratic courses that have never been charted before.

So that the areas of the country that are interested in this, assuming that your coverage can be wide enough and broad enough, ought to be extended to nearly every State in the Union. I think there might very well be a good chance of the States being interested.

Senator LEHMAN. Senator Bush.

Senator Bush. Mr. Chairman, does the Governor know whether the communities in Massachusetts generally have satisfactory zoning laws applicable to floods or other natural disasters? Or, may I put the question differently? Do you have a law which empowers these communities to make such ordinances to protect encroachment?

Governor HERTER. Yes; we have a general enabling act which allows all communities to set up their own zoning regulations.

Senator Bush. Do you have any idea how they behave under that enabling act, so to speak?

Governor HERTER. Well, from the point of view of flood hazard, which is the thing you are most interested in, I do not think it has been a serious consideration up to now.

Commissioner PRESTON. No, it has not.
Governor HERTER. Commissioner Preston can probably-

Commissioner PRESTON. There has been a considerable interest in it, shall we say, since the hurricanes of last year, and our department, the division of planning, has been advising and advocating flood-plan zoning and other measures to insure prevention for several yearsthe institution of local ordinances.

The idea has been rather slow to gather momentum, but these disasters of last year, the hurricanes, and the floods of this year have stepped up considerable interest in that. Our planning division has been working with quite a few towns on it now to put these flood-plan zonings into effect.

Governor IIERTER. I think I might add one thing there, and that is that a very considerable part of our own difficulty in the flood came from small streams that nobody would have anticipated would suddenly become flash-flood streams.

Senator Bush. Yes.

Governor IIERTER. There again the plans that have been talked of in connection with flood control are certainly of great importance for major drainage systems. In this particular one, for instance, it was very fortunate for Massachusetts and for Connecticut that in the upper reaches of the ('onnecticut the rains did not fall heavily in New Hampshire and Vermont.

But a great many entirely new streambeds spread out of this that nobody could have anticipated, and there a zoning ordinance would not have been of any help at all. Areas were very severely damaged

or wiped out where there had never been any thought of a strong water hazard. Senator Bush. Do you not feel, Governor, that the implementation

. of existing authorizations for flood projects in New England as authorized by the Congress on the recommendation of the Corps of Engineers some years ago—the appropriation for completing that system—is a vital necessity at this time?

Governor HERTER. Yes; very definitely.

Senator Bush. And do you not feel too that such completion would very greatly reduce the cost of flood insurance to the Federal Government or anybody else?

Governor HERTER. Oh, there is no question about that. I think the figures from the Army engineers that have already been produced to show what existing reservoirs were able to save from the point of view of the recent floods were very impressive.

Senator Bush. I feel, Mr. Chairman, we in New England do not want to lose sight of that flood protection system, because I think that is basic in the whole thing, if you will pardon parenthetical reference to it.

Senator LEHMAN. We, of course, have the same problem in New York State. I am convinced that we should not only refuse to curtail the prosecution of flood control but we should do everything in our power to increase appropriations and to speed it up. I think that is essential. I do not think anybody is unwilling to see that. The trouble is that it takes so long—at the rate appropriations have been made in recent years.

Senator Bush. Yes. Well, I was not suggesting it be a substitute for flood-insurance programs. I am sure the Senator understands that. But it would be, rather, an inducement to a good flood-insurance program.

Senator LEHMAN. Governor, was there much crop damage in Massachusetts ?

Governor HERTER. There was considerable crop damage in the Connecticut Valley particularly. There again I note that the cropdamage question came up. I doubt whether any of our farmers has ever thought of taking out crop insurance. They suffered very severely. Some of the tobacco growers and some of the others had very serious losses. On the other hand, I am a little inclined to agree with Senator Kennedy that when you get into crop insurance as such as a part of the whole you do run afoul of another Federal program and that those ought to be very carefully thought out and thought through so there won't be two programs covering the same crops.

Senator LEHMAN. Well, as I stated when Senator Kennedy was testifying, I think some of the most heart-rending accounts that were given before this committee came from farmers who lost their crops, either crops that had already been harvested but not sold or crops still growing. That was true in both the August flood and in the October flood.

Governor HERTER. There again, Senator, I do not envy you the job of trying to define a natural disaster if you are going to apply it to crops. Whether an influx of locusts or a new grub or whether it would have to be water or climatic conditions, drought affecting a crop, presents very real hazards and very real difficulties of definition.

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