The NFIP, in effect, created the ‘unique nature’ of flood risks. Because NFIP provided inexpensive flood coverage, it encouraged building in high risk areas such as barrier islands. Now, the justification for continuing the program is that no insurer is dumb enough to provide coverage at NFIP rates?
The Flood Insurance should be purchased in the regular insurnace market. We should not be subsidizing folks that want to live on the river bank. THey are free to live where they want, but they need to pay for the flood coverage or take their chances.
One reason the Federal Government is and should remian involved in Flood Insurance Risk Management is that waterways, large small and smaller yet, are still under the control of the US Army Corps of Engineers, (a Federal funded agency) and as they constructed the levees, flood gates and pumping staions. As long as they exercise those controls, they (Federal Government)have an obligation to protect the public from flood damage.
Bob, great point. The Feds opened the Morganza floodgate to save New Orleans and Baton Rouge by diverting flood waters earlier this year, That forced the evacuation of 25,000 people who were not in the direct path of the flood waters and sacrificed many of their homes.
Of course not. There are thousands of private insurers willing to sell auto insurance to consumers. That’s not the case for flood insurance – that’s why we have a national flood insurance program. If that is abolished, where will consumers buy flood insurance to protect their homes? Do you think private insurers will step up? How do you know? Why would they? “Miller’s amendment calls for a complete shutdown of the program as of January 2012.”
While I agree that govt-run insurance programs are not ideal, I think just dumping the flood program as proposed by this legislator is just irresponsible. No doubt that premiums need to increase substantially, especially in coastal/flood prone areas. We shouldn’t have to eat $18 billion, but imagine if we didn’t have a flood insurance option earlier this year.
There might be thousands of private insurers willing to sell flood at actuarially-sound rates.
That’s my overall point: Government writes flood at insufficient rates. Government loses a ton of money. Government claims that the ‘unique nature’ (losing a ton of money) makes the Government involvement necessary. Big Government justifying the existence of Big Government by losing billions of dollars doesn’t make a bunch of sense to me.
“Miller argues that NFIP is a bad deal for Michigan whose residents subsidize payments to property owners in other states. From 1978 to 2010, Michigan residents paid $284 million in premiums and received $45 million in claims, she points out, citing Congressional sources. Meanwhile, residents in Louisiana paid $3.9 billion in premiums and received $16 billion in claims payments.”
The Congresswoman seems to make the common mistake of equating insurance with a savings account. You don’t always get back what you pay in, but sometimes you get more than you pay in. What the statistics show to me is that rates should probably be adjusted to reflect greater risk in areas where the risk is greater. But to do away with the program altogether? How would the people in Michigan who did receive claim payments have felt if they had no insurance?
Nobody is saying “do away with flood insurance.”They are saying get the US Govt out of it and let the market rate it correctly and provide it at the appropriate premium. The only problem is the US comes in with give aways to those that dont buy it, and that needs to stop.
Wasn’t the NFIP set up in the first place because no private insurers wanted to write it? I wasn’t in the business then but that’s what I’ve been told. Are there any guarantees that if the federal government got out of writing flood insurance that any company would come in to fill the void? Seems like this is the definition of adverse selection which would lead me to believe that the private sector really doesn’t want the business.
Flood insurance should not be called insurance because it does not meet the definition of insurance. Neither does it meet the defiinition of a gamble. Therefore, it is a public policy problem and protection needs to be provoded by a governmental body. That is part of what the US Army corp of engineers do, however that is only a small part. A much better solution would be to outsource the administration to an organization like the Insurance carriers that handle work comp assigned risk programs and subsidize the excess losses. Those insurance companies that do the adminsitration work for the states do all the work and pay claims from the premiums but submit the excess losses for reimbursement. Much more efficient and less costly.
Let’s see it only took about 30 years for the flood insurance program to become a reality, then came Katrina and the President and many others sold Brown down the river for following the guidelines set by Congress. Then came more floods in which the new custodians paid out millions by “mistake” and and now they want the money back. Congress is who you call when you positively, absolutely must create a train wreck of a good idea. Market rate for flood insurance? You gonna buy stock in that company? Good luck to you.
The NFIP, in effect, created the ‘unique nature’ of flood risks. Because NFIP provided inexpensive flood coverage, it encouraged building in high risk areas such as barrier islands. Now, the justification for continuing the program is that no insurer is dumb enough to provide coverage at NFIP rates?
The Flood Insurance should be purchased in the regular insurnace market. We should not be subsidizing folks that want to live on the river bank. THey are free to live where they want, but they need to pay for the flood coverage or take their chances.
JB
One reason the Federal Government is and should remian involved in Flood Insurance Risk Management is that waterways, large small and smaller yet, are still under the control of the US Army Corps of Engineers, (a Federal funded agency) and as they constructed the levees, flood gates and pumping staions. As long as they exercise those controls, they (Federal Government)have an obligation to protect the public from flood damage.
Bob, great point. The Feds opened the Morganza floodgate to save New Orleans and Baton Rouge by diverting flood waters earlier this year, That forced the evacuation of 25,000 people who were not in the direct path of the flood waters and sacrificed many of their homes.
The government controls the interstate highway system as well. Should they write auto insurance?
Of course not. There are thousands of private insurers willing to sell auto insurance to consumers. That’s not the case for flood insurance – that’s why we have a national flood insurance program. If that is abolished, where will consumers buy flood insurance to protect their homes? Do you think private insurers will step up? How do you know? Why would they? “Miller’s amendment calls for a complete shutdown of the program as of January 2012.”
While I agree that govt-run insurance programs are not ideal, I think just dumping the flood program as proposed by this legislator is just irresponsible. No doubt that premiums need to increase substantially, especially in coastal/flood prone areas. We shouldn’t have to eat $18 billion, but imagine if we didn’t have a flood insurance option earlier this year.
There might be thousands of private insurers willing to sell flood at actuarially-sound rates.
That’s my overall point: Government writes flood at insufficient rates. Government loses a ton of money. Government claims that the ‘unique nature’ (losing a ton of money) makes the Government involvement necessary. Big Government justifying the existence of Big Government by losing billions of dollars doesn’t make a bunch of sense to me.
“Miller argues that NFIP is a bad deal for Michigan whose residents subsidize payments to property owners in other states. From 1978 to 2010, Michigan residents paid $284 million in premiums and received $45 million in claims, she points out, citing Congressional sources. Meanwhile, residents in Louisiana paid $3.9 billion in premiums and received $16 billion in claims payments.”
The Congresswoman seems to make the common mistake of equating insurance with a savings account. You don’t always get back what you pay in, but sometimes you get more than you pay in. What the statistics show to me is that rates should probably be adjusted to reflect greater risk in areas where the risk is greater. But to do away with the program altogether? How would the people in Michigan who did receive claim payments have felt if they had no insurance?
Nobody is saying “do away with flood insurance.”They are saying get the US Govt out of it and let the market rate it correctly and provide it at the appropriate premium. The only problem is the US comes in with give aways to those that dont buy it, and that needs to stop.
Wasn’t the NFIP set up in the first place because no private insurers wanted to write it? I wasn’t in the business then but that’s what I’ve been told. Are there any guarantees that if the federal government got out of writing flood insurance that any company would come in to fill the void? Seems like this is the definition of adverse selection which would lead me to believe that the private sector really doesn’t want the business.
I agree with The Other Point of View … a very logical analysis.
Flood insurance should not be called insurance because it does not meet the definition of insurance. Neither does it meet the defiinition of a gamble. Therefore, it is a public policy problem and protection needs to be provoded by a governmental body. That is part of what the US Army corp of engineers do, however that is only a small part. A much better solution would be to outsource the administration to an organization like the Insurance carriers that handle work comp assigned risk programs and subsidize the excess losses. Those insurance companies that do the adminsitration work for the states do all the work and pay claims from the premiums but submit the excess losses for reimbursement. Much more efficient and less costly.
Let’s see it only took about 30 years for the flood insurance program to become a reality, then came Katrina and the President and many others sold Brown down the river for following the guidelines set by Congress. Then came more floods in which the new custodians paid out millions by “mistake” and and now they want the money back. Congress is who you call when you positively, absolutely must create a train wreck of a good idea. Market rate for flood insurance? You gonna buy stock in that company? Good luck to you.