Flood insurance should be actuarially priced and the Government should not be involved. People choosing to live in flood prone areas should pay market rates.
Much as states agreed to handle surplus lines taxes in a common way, amending state laws concurrently, a replacement of the federal flood insurance program could come about if the states would require flood to be an insured cause of loss in all homeowners’ policies and small business property policies. That would enhance the spread of risk, enable insurers to charge smaller premiums to all policyholders rather than enormous premiums to the ones most exposed, and put the whole exposure on a footing more similar to fire insurance. I foresee low-risk policyholders squawking about having to purchase coverage they don’t currently use, but if they realize they’re paying for it through tax subsidies to the NFIP anyway (where they get no benefit unless they also purchase a policy), this approach makes a lot of sense. A significant proportion of NFIP claims occur in locations that are not considered high risk. City water mains break and result in floods in low-risk areas. There are plenty of reasons for low-risk properties to have flood insurance, and the commercial marketplace absolutely could manage the risk if insurers would just dedicate themselves to creating a solution rather than fighting the idea so much.
Flood insurance should be actuarially priced and the Government should not be involved. People choosing to live in flood prone areas should pay market rates.
Much as states agreed to handle surplus lines taxes in a common way, amending state laws concurrently, a replacement of the federal flood insurance program could come about if the states would require flood to be an insured cause of loss in all homeowners’ policies and small business property policies. That would enhance the spread of risk, enable insurers to charge smaller premiums to all policyholders rather than enormous premiums to the ones most exposed, and put the whole exposure on a footing more similar to fire insurance. I foresee low-risk policyholders squawking about having to purchase coverage they don’t currently use, but if they realize they’re paying for it through tax subsidies to the NFIP anyway (where they get no benefit unless they also purchase a policy), this approach makes a lot of sense. A significant proportion of NFIP claims occur in locations that are not considered high risk. City water mains break and result in floods in low-risk areas. There are plenty of reasons for low-risk properties to have flood insurance, and the commercial marketplace absolutely could manage the risk if insurers would just dedicate themselves to creating a solution rather than fighting the idea so much.