This issue highlights an often overlooked aspect of flood insurance – one of its goals is to reduce demands for federal disaster relief by having potential victims self-fund some of what otherwise would be relief. It recognizes the (oft-proved) assumption that when presented with people in need after a disaster the Government won’t say no. From this perspective – oversimplified- a year when the NFIP took in $4 billion in premiums and paid $5 billion in claims is not a $1 billion deficit but a $4 billion savings in disaster relief. If the insurance ecomes too expensive, as has proven to be the case with earthquake insurance and now threatens to be the case with flood insurance, this benefit is lost. This has been why preserving affordability has always – until Biggert-Waters – been a cornerstone of the flood insurance program. This is why B-W, which tries to make flood insurance more like earthquake insurance, is penny-wize and pound foolish.
This issue highlights an often overlooked aspect of flood insurance – one of its goals is to reduce demands for federal disaster relief by having potential victims self-fund some of what otherwise would be relief. It recognizes the (oft-proved) assumption that when presented with people in need after a disaster the Government won’t say no. From this perspective – oversimplified- a year when the NFIP took in $4 billion in premiums and paid $5 billion in claims is not a $1 billion deficit but a $4 billion savings in disaster relief. If the insurance ecomes too expensive, as has proven to be the case with earthquake insurance and now threatens to be the case with flood insurance, this benefit is lost. This has been why preserving affordability has always – until Biggert-Waters – been a cornerstone of the flood insurance program. This is why B-W, which tries to make flood insurance more like earthquake insurance, is penny-wize and pound foolish.