Senate Approves Bill to Curb Flood Insurance Hikes

By Andrew G. Simpson | March 13, 2014

  • March 13, 2014 at 6:37 pm
    Bill Price says:
    Like or Dislike:
    Thumb up 7
    Thumb down 10

    Great thanks to all Congress-folk.
    Certainly, NFIP should be actuarial, and now, this delay gives Congress and Property Owners a chance to see where the NFIP stands, and what needs to be done to fix underlying problems without forcing many Taxpaying families out of their homes, or into bankruptcy.
    Bill Price USLandAlliance.US

    • March 14, 2014 at 7:44 am
      Roland says:
      Well-loved. Like or Dislike:
      Thumb up 27
      Thumb down 12

      “Certainly, NFIP should be actuarial…”
      Then why should the stinking government be involved in the first place? Private companies competing with one another in pursuit of profit will always provide actuarially sound rates. They have to; otherwise they go bankrupt.
      Americans are suckers if they think that near-Soviet-style central planning by vote-grubbing politicians will make their lives better.

      • March 14, 2014 at 10:41 am
        Libby says:
        Like or Dislike:
        Thumb up 7
        Thumb down 5

        If private markets had stepped up to provide coverage in the first place, we would never have needed NFIP. They didn’t. The government had to step in at that time.

        We now have private markets competing for flood business. Let’s see how they do. If they do well, then NFIP should be a thing of the past.

      • March 14, 2014 at 1:41 pm
        Bill Price says:
        Like or Dislike:
        Thumb up 8
        Thumb down 2

        Interstate Highways, Post Offices, Airports, Roads and Bridges, Schools, Universities, Dept. of Health, Immigration, Social Security, Medicare, Courts, National Parks ,,, all government. We can complain about each, and all are always fraught with financial problems, but they are also inextricably intertwined with American Culture, and have variously contributed to America being the greatest Country in history of the World.
        As with living, it’s a balance.
        Flood insurance has also facilitated extensive tax producing economic development in construction of retirement homes, resorts, and other development that provides homes and enjoyment to millions of Americans.
        At the same time, it is the citizen’s obligation to watch Congress to assure honest, open, fair Public Policy is made in a financially responsible manner.
        IMO it is discouraging that with Flood insurance, Congress passed BW-12 when we can’t find that NFIP, FEMA, CRS, or OMB have presented comprehensive financial information,, nor can we find that the impacts of (theoretical) Acceleration of Sea Level Rise Planning requirements of BW-12, which will force hundreds of thousands of taxpaying families out of the homes, was considered.
        This Delay can give time to properly consider the issues.
        Bill Price ( USLandAlliance.US)

        • March 16, 2014 at 8:16 pm
          Roland says:
          Like or Dislike:
          Thumb up 3
          Thumb down 3

          Bill, you make the common error of assuming that if a valuable service that traditionally has been provided by government had not been provided by it, then it never would have existed. This is laughable. When entrepreneurs are left alone, they will produce what consumers want, and they will do it with the best possible quality at the lowest possible price. Most importantly, they will do it without forcing any individual to pay for something he doesn’t want. Bad players will be punished swiftly and severely as consumers refuse to buy from them. On the other hand, when government sticks its nose into an industry, it is guaranteed to squander resources as it ham-handedly tries to figure out what’s best for consumers instead of letting supply and demand and the free-market price system function. Worse still, it immediately creates opportunities for the big players to influence regulations – backed by threats of fines and imprisonment – that discourage entry into the market by new sellers and put competitors at a disadvantage. Corruption and waste are inherent in any industry that is heavily regulated by government, and you will never change that. Instead of having childish faith that central economic planning will work if only we elect enough “good people,” we should tell the politicians to shut up and leave us alone; we can do just fine without their “help.”

          • March 17, 2014 at 10:07 am
            Ron says:
            Like or Dislike:
            Thumb up 3
            Thumb down 0

            Roland,

            The issue is not whether entrepreneurs would provide these services, but would they be able to offer such services to all citizens and still be profitable?

            My position is simple, let the free market handle most production and services that should be for-profit such as manufacturing, financial services, entertainment, the arts, and luxury health care (private rooms, plastic surgery, in-home health care, etc.). The government should provide services that should not be for profit such as infrastructure, defense, education, basic health care and police/fire. These are essential services that a society needs to provide all of its citizens in order to perpetuate the notion that every citizen has the opportunity to become successful.

            If you leave these to the private sector, millions would be left out and defenseless.

          • March 18, 2014 at 6:07 pm
            Roland says:
            Like or Dislike:
            Thumb up 0
            Thumb down 2

            Ron, it’s a fallacy that because some services are so important or widely needed they can’t be trusted to the market. Take one of your examples: fire protection. There is absolutely no reason why it has to be provided by government. Property owners want fire protection, and would be willing to pay private companies for it. Wouldn’t you? In most communities, the tax-supported firehouses are like palaces, and the trucks are polished and babied as if they were Ferraris. That is silly and wasteful; no company that had to make a profit would squander resources that way. I recall reading that in one California wildfire a couple of years ago, the only homes left standing in one neighborhood were those whose owners had contracted with private fire protection companies. Those companies are contractually obligated to make sure their customers’ structures are protected, and would be in danger of going out of business if they didn’t live up to their promises. Next time you have a fire loss, try suing the tax-supported fire district for failing to protect your property and see how far you get. I guarantee that just like the tax-eating police, they will laugh in your face at the suggestion that they have any obligation to perform their job to your satisfaction. Oh, but if fire protection were left to the greedy capitalists, then only the rich could afford it! Right. Just like only the rich can afford cell phones and microwave ovens. Markets work; collectivism doesn’t.

    • March 14, 2014 at 10:42 am
      Libby says:
      Like or Dislike:
      Thumb up 6
      Thumb down 2

      Bill, do you really think Congress will investigate NFIP? I don’t think so.

      • March 14, 2014 at 1:44 pm
        Bill Price says:
        Like or Dislike:
        Thumb up 6
        Thumb down 0

        I would like to know why, in a mountain of reports, 4 government agencies have not produced a single simple “Bookkeeping” overview of NFIP.

        • March 14, 2014 at 3:32 pm
          Libby says:
          Like or Dislike:
          Thumb up 5
          Thumb down 0

          I would too, but I doubt it’s high on Congress’ list. They’re too busy with their own hidden agendas to actually be good stewards of the country. Vote them all out come election day!

  • March 14, 2014 at 8:04 am
    Jim G says:
    Hot debate. What do you think?
    Thumb up 18
    Thumb down 9

    Thanks for passing this legislation. Now I feel somewhat better about my income taxes funding welfare and unemployment recipients even though I have never collected a penny from either one. I feel somewhat better that the very high real estate taxes I am paying to my town to fund the new highschool even though my children are finished with college. I noticed that most of the nay votes came from Senators that live in the midwest I just hope the next time a tornado/flash flood/etc hits your town that you do not request a Federal Disaster loan from FEMA–just saying.

  • March 14, 2014 at 8:48 am
    J.S. says:
    Well-loved. Like or Dislike:
    Thumb up 12
    Thumb down 1

    The government is involved because the private insurance industry long ago decided not to provide coverage other than on a limited basis.

    The problem with flood is loss severity. A flood causes many, many times the damage of a tornado such as hit Joplin. Imagine how much bigger the hit to surplus would have been with Katrina, Rita, Wilma, Irene, etc if the industry was also paying for flood losses. There is no way the insurance industry will put that much capital at risk on a single event.

    • March 14, 2014 at 9:25 am
      Policy Person says:
      Like or Dislike:
      Thumb up 5
      Thumb down 1

      Actually, the real reason the private insurance market didn’t work is because, prior to the NFIP, there was no requirement to purchase flood insurance. Therefore, the only ones who purchased it were those that knew they were extremely likely to flood. This meant that the losses were very high, so premiums had to rise until the point that they were so expensive that no one would buy it.

      It is not necessarily true that the private market won’t get involved in flood insurance because of the massive potential exposure; they will get involved if they believe they can make a profit, and part of that will be the cost of reinsurance. Private insurers are now already getting into the flood insurance market, but this change by Congress may actually result in a slowing or reversal of that trend.

      • March 14, 2014 at 3:45 pm
        IJ Reader says:
        Like or Dislike:
        Thumb up 6
        Thumb down 0

        The private market can’t and won’t compete with subsidized and non-actuarially sound rates. That’s the problem with repealing these pricing increases. It will continue to be subsidized (read taxpayer funded) rather than borne solely by those who should be paying for their fair share of the exposure.

  • March 14, 2014 at 11:42 am
    Roland says:
    Well-loved. Like or Dislike:
    Thumb up 13
    Thumb down 2

    When people say that private companies were/are unwilling to cover flood, what they really mean is that private companies are unwilling to cover flood at rates so low that they will probably lose money. Assuming you were allowed by law to do so, would you underwrite flood coverage of a $100,000 home in an area that historically has flooded every five years – for a premium of $120,000 per year? I would. In a free market, a consumer can get just about anything he wants if he is willing to pay enough. But of course homeowners would not pay such a ridiculous premium. That fact would have prevented many of these structures from being built in the first place. In other words, without government interference in the market, this problem never would have developed.
    Now that NFIP is entrenched, and people have come to expect actuarially unsound rates (which, as we see from this article, are likely to continue as spineless politicians cave under pressure from voters to be “compassionate”), it will be very difficult for private companies to compete when they are given the chance, and I don’t blame them one bit for saying “No, thanks” to the opportunity. Would you want to compete with an institution that can:
    1) Take by force as much money as it pleases from productive people?
    2) If that proves insufficient, simply print more of it?
    3) Change the rules any time it feels like it?

    • March 16, 2014 at 12:04 am
      gerard says:
      Like or Dislike:
      Thumb up 3
      Thumb down 7

      And if Big Insurance did write flood policies again, that $120,000 premium would not be too far off the mark as the companies would collude to keep premiums exorbitantly high. Big Insurance is a legal organized-crime. We need stricter federal and state regulations today!

      • March 16, 2014 at 8:30 pm
        Roland says:
        Like or Dislike:
        Thumb up 3
        Thumb down 1

        Hi Gerard. Please see my comment above. If you want to guarantee collusion, corruption and “legal organized crime,” then keep demanding more government regulation. Without it, companies would be forced to either please customers or go out of business. In a free market, those are the only choices a businessman has. In the American system, on the other hand, there is another choice: get out your big fat checkbook and buy some government regulations that will discourage competitors from entering your market and make life difficult for those who do.

    • March 16, 2014 at 9:23 pm
      Elizabeth Malone says:
      Like or Dislike:
      Thumb up 1
      Thumb down 2

      It is only government involvement that restricts and regulates construction in SFHAs. Once the community accepts the flood maps required to participate, then any new structure in an SFHA must be resilient. The subsidies are for homes that were built PRIOR to inclusion in the flood plain management – pre-FIRM homes. The rising oceans and fiercer storms created by global warming have increased the SFHA in NYC by 91%, an additional 34,000 properties that ALREADY exist. Add them to all the houses that existed on the coast when Carter created the NFIP in 1968. My neighborhood, Gravesend, was founded in 1640.

  • March 14, 2014 at 12:04 pm
    Michael says:
    Like or Dislike:
    Thumb up 9
    Thumb down 3

    Why is single-payer flood insurance (NFIP) ok but single payer health insurance is socialized medicine?

    • March 14, 2014 at 1:33 pm
      Libby says:
      Like or Dislike:
      Thumb up 5
      Thumb down 2

      Great question, Michael!

  • March 14, 2014 at 3:04 pm
    Squandered Youth says:
    Like or Dislike:
    Thumb up 4
    Thumb down 0

    The government got into flood insurance as a way to force people to self-fund some of their own disaster relief, a purpose for which it did not have to break even within the four corners of the program to serve a public good, since it was creating savings in a different account (disaster relief). The pre-Biggert-Waters lip service to NFIP being “actuarial” on a stand-alone basis, even for extreme events, was a fig leaf Katrina blew away, then Biggert-Waters proved was impossible. The public either needs to embrace a flood insurance program that covers normal years and has other benefits even when it runs a deficit in exceptional years, or get the government out of the flood insurance issue completely and NOT require flood insurance as a condition of a mortgage. What made Biggert-Waters a debacle is that it required people to buy a product at a price that was not worth the benefit provided. There is no incentive for efficiency when the government creates a market in which people are compelled to buy regardless of cost.

  • March 14, 2014 at 3:20 pm
    Elizabeth Malone says:
    Like or Dislike:
    Thumb up 4
    Thumb down 0

    The NFIP flood policy is ONE part of the flood plain management agreement between communities and NFIP. It is wholly unlike private insurance because access to it is restricted to communities that agree to and enforce mitigation requirements; no insurance company could enforce that.

    • March 14, 2014 at 3:44 pm
      Ratemaker says:
      Like or Dislike:
      Thumb up 5
      Thumb down 0

      No insurer can enforce it, and no policyholder would be willing to buy it at the rates the private market would have to charge.

  • March 14, 2014 at 3:24 pm
    Interesting analogy says:
    Like or Dislike:
    Thumb up 1
    Thumb down 0

    Earthquakes pose a severity problem for insurers, but there is a private market for them. I don’t remember seeing an NEQP.

  • March 15, 2014 at 11:24 am
    what? says:
    Like or Dislike:
    Thumb up 5
    Thumb down 0

    The problem in my community for example is you own a home near a little creek for 20 years. Over those twenty years they clear land and build homes upstream. You are transferred and need to sell your home that has never flooded but you can’t because now you are in the floodplain. Once the government gets into something they never get out. So rates never were correct. Plus it is city government not handling, or not requiring developers to handle the run off. Vicious circle. Its not all about homes on the coasts.

  • March 15, 2014 at 3:04 pm
    lawrence says:
    Like or Dislike:
    Thumb up 1
    Thumb down 0

    if you have a mortgage you are forced to buy weather you like it or not had quotes as high as 5100.00 per year with 5000 deductable and nothing covered on inside i would not buy ins but am forced to buy mortgage co if rates keep increasing will have to walk away from this place have had hard time getting quotes most ins co,s not responding ought to be a law that you can sign waver that you will not make a claim but morgage co,s i,m sure will not go along -having difficult selling as people not wanting to pay high rate -hoping in 4 yrs take my savings and pay off mortgage have no other options at this time

  • March 15, 2014 at 11:53 pm
    gerard says:
    Like or Dislike:
    Thumb up 4
    Thumb down 4

    Now that Biggert Waters is somewhat curtailed, how about Congress capping the premiums Big Insurance gets for the Flood Policy at 10%?

    Doing any business with Big Insurance is like dealing with the loan shark on the corner! They need a strong police (read: gov’t)presence to curb their usury ways!

    • March 18, 2014 at 10:52 am
      Libby says:
      Like or Dislike:
      Thumb up 2
      Thumb down 0

      Is 10% a fair amount for the overhead expense incurred by the carrier? If so, how did you come to that conclusion?

  • March 18, 2014 at 1:37 pm
    Ralph Geuder says:
    Like or Dislike:
    Thumb up 0
    Thumb down 1

    For those who like the parties to agree, here it is. Soak the rest of us to pay for the losses of those who choose to live in areas prone to flooding. Shows that neither party has any courage.

  • March 18, 2014 at 2:56 pm
    Kevin says:
    Like or Dislike:
    Thumb up 4
    Thumb down 0

    I am a realtor in Florida. I saw $100,000 homes for from $900.00 per year for flood insurance to $12,000.00 this not a typo… i saw others on more expensive homes go over 30k. It forced homeowners to sell but the problem is nobody would buy. The private market did step in for example in an AE flood zone the cheapest was $4065.00 in V zones it was $9177.00 for the cheapest zero contents. This was for $250k in coverage 5 k deductable. Something had to be done, it put honest hard working people on the street.

    We still need to try and work something out but clearly with Biggert Watters the cure was worse than the disease. it made entire neighborhoods worthless.

  • March 19, 2014 at 8:43 pm
    Bill Parecki says:
    Like or Dislike:
    Thumb up 0
    Thumb down 5

    I think it is a fundamental fault that people who chose to buy or build in areas that are know to flood should expect everyone to pay subsidies their insurance. They should take accountability for their actions and not get relief from the rest of us. Now where are most of these properties. High end properties along the ocean. I don’t feel that it is my job to subsidies them.



Add a Comment

Your email address will not be published. Required fields are marked *

*

More News
More News Features