Few Have Flood Insurance

Few Have Flood Insurance
How Uncle Sam tempts people into hurricanes' paths
Author

13 September, 2017

Congress often discusses fixing flood insurance to stop encouraging Americans to build in harm's way, but the National Flood Insurance Program is still nearly as dysfunctional as it was 19 years ago.

"All the sudden you're paying a loan on your house along with your mortgage", said Bob Hunter, the director of insurance for the Consumer Federation of America and the former Commissioner of Insurance for the state of Texas.

The insurance program, which is part of FEMA, provides the only protection against flooding that most homeowners and businesses can get.

The administration should now reinstate the measure so we don't leave communities - like those in Texas - and their infrastructure highly exposed to flood risk and costly fix bills.

Higher Ground revealed a home in Houston that was valued at $114,480, but which had been flooded 16 times and thus received $806,591 in federally subsidized flood insurance payments. Even if federal aid money is provided, it can often take much longer to trickle down to homeowners, delaying recoveries from flooding.

In 61 of the state's 100 counties, fewer than 1 percent of properties are covered by flood insurance. It passed a bill in 2012 that would have raised premiums, but after an outcry from numerous 5 million policyholders, Congress changed the program again in 2014 to cap the increases policyholders would have to pay.

"The Department expects insurers to settle claims in a timely manner, and work closely with the Department to help individuals affected by this natural disasters", said Deputy Commissioner Jay Florence. Insurance groups say that unless you live on a hilltop, you should purchase flood insurance these days. Remember, each covered loss is subject to a deductible. In 2017, some 15 counties had an average flood insurance annual premium of more than $1,000, compared to just five such counties in 2012.

"Many people assume incorrectly that their basic homeowners insurance policy will cover damage from flooding", Cioppa said. Although lenders typically require flood insurance on mortgaged properties within these zones, once the mortgage is paid off, homeowners may decide to eliminate the expense. The federal flood-insurance program, which is about $25 billion in debt, is up for reauthorization this year. It is now almost $25 billion in the red, piling debt onto the national credit card.

The combination of climate change, overdevelopment and outdated flood zone maps lead many experts to predict that storms will become stronger, more frequent and cause more damage in the coming years. In most cases, the answer is no. "We have to start thinking in terms of raising the cost of flood insurance". Instead, the newly created Flood Insurance Administration attempted to launch the program on a national scale with insufficient resources. Essentially, its premiums are not high enough to cover how much it pays out on claims and its other costs.

Second, policymakers must understand that taking action to mitigate flood risk saves more than lives and property; it saves taxpayers money too.

If RMS' estimate is correct at $35 billion or even the upper bound at $40 billion, including up to $10 billion for the NFIP, it suggests a private re/insurance and ILS market loss of up to $25 billion or even $30 billion at the upper bound from Harvey, higher than previous estimates. The same subsidies advocate might say that to take a position against subsidies is to prevent growth and push people into rural areas where they prefer not to live.


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