I think that rates should be drastically increased. And my family has a beach house. But, something tells me that all those Southern politicians that have been against subsidized Govmint Insurnce are going to shout the loudest for it if their coastlines are faced with much higher flood insurance premiums.
To the contrary of the statement that private insurance carriers will not enter the flood insurance they will. The insurance companies however will not compete against the Federal Government. Private Insurance would underwrite and would charge accordingly. Individuals probably would not be able to rebuild several times, because the premiums would escalate. That of course begs the question why are they allowed to do this with subsidized tax dollars.
There is no doubt that private enterprise does a better job than the Federal Government at a lot less cost.
I think that perhaps the best solution is to make all HO’s & DP’s include flood as a covered peril, thus obtaining an adequate spread of risk, and eliminating the problem of adverse selection. The two main problems with this approach noted in the article, and perhaps a couple of other issues, could be addressed:
1)Problem: This would force lower-risk property owners to subsidize higher-risk property owners, by including a peril they don’t need. Solution: Cross-subsidization already occurs. The very nature of insurance is that the lowest risks might feel they’re paying too much and the highest risks might feel that insurance is a bargain. Furthermore, because HO’s & DP’s are modular policies, there are many perils and extensions of coverage that not everyone wants or needs, but they are part of the entire policy and included in the premium, like it or not. And, of course, the rates would be impacted by the location of the property, as they already are for all other perils.
2) Problem: Affordability due to potential restrictions on rating freedom. Solution: A separate high deductible on flood claims, thereby lowering the frequency (ruling out claims for small amounts) while still addressing the severity (larger, more catastrophic damages)and keeping the NFIP, but as a re-insurer, not a primary insurer. The NFIP’s expense ratio would be dramatically lower, and the primary insurer’s expense ratio would increase a nominal amount, if at all. The primary insurer’s loss-ratio would be a non-issue, as the NFIP would be the re-insurer. And, the NFIP’s loss-ratio could be lower than it currently is, if the the re-insurance premiums paid in are more than is currently collected as direct premium. Under this scenario we would expect the NFIP’s combined ratio to always equal 100%.
Lastly, the issue of over-development of coastal areas or poor land use behaviors, should be addressed by building codes, and if they aren’t, then those areas should simply have their premiums/re-insurance premiums increased to reflect that. And masking the true risk of certain areas should be a non-issue with reasonably accurate FIRM’s and data collection and evaluation.
I think that rates should be drastically increased. And my family has a beach house. But, something tells me that all those Southern politicians that have been against subsidized Govmint Insurnce are going to shout the loudest for it if their coastlines are faced with much higher flood insurance premiums.
To the contrary of the statement that private insurance carriers will not enter the flood insurance they will. The insurance companies however will not compete against the Federal Government. Private Insurance would underwrite and would charge accordingly. Individuals probably would not be able to rebuild several times, because the premiums would escalate. That of course begs the question why are they allowed to do this with subsidized tax dollars.
There is no doubt that private enterprise does a better job than the Federal Government at a lot less cost.
I think that perhaps the best solution is to make all HO’s & DP’s include flood as a covered peril, thus obtaining an adequate spread of risk, and eliminating the problem of adverse selection. The two main problems with this approach noted in the article, and perhaps a couple of other issues, could be addressed:
1)Problem: This would force lower-risk property owners to subsidize higher-risk property owners, by including a peril they don’t need. Solution: Cross-subsidization already occurs. The very nature of insurance is that the lowest risks might feel they’re paying too much and the highest risks might feel that insurance is a bargain. Furthermore, because HO’s & DP’s are modular policies, there are many perils and extensions of coverage that not everyone wants or needs, but they are part of the entire policy and included in the premium, like it or not. And, of course, the rates would be impacted by the location of the property, as they already are for all other perils.
2) Problem: Affordability due to potential restrictions on rating freedom. Solution: A separate high deductible on flood claims, thereby lowering the frequency (ruling out claims for small amounts) while still addressing the severity (larger, more catastrophic damages)and keeping the NFIP, but as a re-insurer, not a primary insurer. The NFIP’s expense ratio would be dramatically lower, and the primary insurer’s expense ratio would increase a nominal amount, if at all. The primary insurer’s loss-ratio would be a non-issue, as the NFIP would be the re-insurer. And, the NFIP’s loss-ratio could be lower than it currently is, if the the re-insurance premiums paid in are more than is currently collected as direct premium. Under this scenario we would expect the NFIP’s combined ratio to always equal 100%.
Lastly, the issue of over-development of coastal areas or poor land use behaviors, should be addressed by building codes, and if they aren’t, then those areas should simply have their premiums/re-insurance premiums increased to reflect that. And masking the true risk of certain areas should be a non-issue with reasonably accurate FIRM’s and data collection and evaluation.
stop paying the WYO 70% of the premiums thats how to inprove this money pit of a federal program.