Let's talk about the National Flood Insurance Program.

[mahatmakanejeeves]

Let's talk about the National Flood Insurance Program.

Link to tweet

Want to be mad about a government insurance program? Be mad about the one that will be critical to cleaning up from Harvey.

By Philip Bump August 28 at 10:18 AM

....
Flooding is one of the most common causes of billion-dollar events — natural disasters that do $1 billion in damage or more. Flooding’s been an expensive problem long enough that, decades ago, private insurers generally stopped offering flood insurance for homes. So the government stepped up, creating the National Flood Insurance Program providing insurance to homeowners in areas prone to flooding. Private insurers cover the homes, but the bills are ultimately paid by the federal government. People who couldn’t be insured for flood damage before can under the NFIP, a program managed by FEMA.

But there’s a problem. As more people have moved into flood-prone areas and climate change has increased the likelihood of flooding, the NFIP has been overwhelmed by severe weather events. ... From 1978 to 2004, the program generally took in more in payments than it paid out in losses.



Then, in 2005, Katrina hit. Losses for which NFIP was responsible that year neared $18 billion — an amount equal to all of the premiums paid from 1991 through 2005.

Then, in 2012, Sandy hit. Losses neared $10 billion. The cost of losses in the years of Katrina and Sandy combined totals nearly half of all of the premiums paid from 1978 to 2016.



....
Philip Bump is a correspondent for The Post based in New York City. Follow @pbump

[greymattermom]

1. So why isn't living in a low lying area

a preexisting condition? In some regions, new buildings have to be raised above flood levels. Maybe if a building is seriously flooded, it should be totaled like a car, and any new building on that lot would have to be raised to be above the level of the flood that caused the damage. Premiums would have to increase to cover the extra cost of building high.

[mahatmakanejeeves]

2. Executive Order 13690 of January 30, 2015 -- Establishing a Federal Flood Risk Management Standard

For Immediate Release January 30, 2015

Executive Order – Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input

EXECUTIVE ORDER
- - - - - - -
ESTABLISHING A FEDERAL FLOOD RISK MANAGEMENT STANDARD
AND A PROCESS FOR FURTHER SOLICITING AND CONSIDERING
STAKEHOLDER INPUT

....
As part of a national policy on resilience and risk reduction consistent with my Climate Action Plan, the National Security Council staff coordinated an interagency effort to create a new flood risk reduction standard for federally funded projects. The views of Governors, mayors, and other stakeholders were solicited and considered as efforts were made to establish a new flood risk reduction standard for federally funded projects. The result of these efforts is the Federal Flood Risk Management Standard (Standard), a flexible framework to increase resilience against flooding and help preserve the natural values of floodplains. Incorporating this Standard will ensure that agencies expand management from the current base flood level to a higher vertical elevation and corresponding horizontal floodplain to address current and future flood risk and ensure that projects funded with taxpayer dollars last as long as intended.

This order establishes the Standard and sets forth a process for further solicitation and consideration of public input, including from Governors, mayors, and other stakeholders, prior to implementation of the Standard.

You know where this is headed, don't you? From twelve days ago (this is a press release):

August 16, 2017
Trump Executive Order Issued on Federal Flood Risk Management Standard and Regulatory Reform

....
The second action, which is related procedurally, but not substantively, is the repeal of Executive Order 13690. Indeed, buried as section 6 of the new EO discussed above, is the following:

“Sec. 6. Executive Order 13690 of January 30, 2015 (Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input), is revoked.”

For those of you who haven’t been tracking this EO, we have provided a number of blogs on it, including an overview, potential comments, concerns from Congress, and our thoughts on FEMA’s proposed regulations here and here. The question now, is whether the mere revocation of 13690 kills the beast. Presumably, each agency that has adopted regulations under the EO will now (or at some point in the future will) revoke those regulations. But the more interesting question is whether the EO has caused Federal employees to think differently about the original EO 11988 (which 13690 amended), such that a new and more robust Federal standard will exist even without 13690. In other words, will the spirit of 13690 live on, even without the force of law, but causing Federal employees to set a more robust standard for projects to be built with Federal funds?

Only time will tell the answer to this question, and we are sure not every agency will think alike. But this is a little bit like saying, don’t think about a pink elephant. Once you say that, it is hard to not think about the elephant.

[JayhawkSD]

3. You didn't cite the part that states the real issue.

"The Government Accountability Office describes the problem with the NFIP as follows: “Since the program offers rates that do not fully reflect the risk of flooding, NFIP’s overall rate-setting structure was not designed to be actuarially sound in the aggregate, nor was it intended to generate sufficient funds to fully cover all losses.” In other words, the NFIP charges less than it needs to."

The net result is that "The NFIP is $24.6 billion in debt" due to charging premiums that were too low to cover losses.

But that was inevitable; was inherent in the nature of what caused the program to be started in the first place. Privately owned insurance companies were no longer issuing flood insurance policies because they had to set the premiums high enough to cover losses. Homeowners were not able to pay those prices and were going without flood insurance as a result. So when the government stepped in, if they set premiums high enough to cover losses then it would not have changed anything - no one would be able to afford to buy flood insurance.

The only possible reason for the government program was to keep flood insurance affordable, and the only possible way to do that was to set the premiums too low to cover losses and have the government pick up the difference. Law makers knew that and made a decision that FEMA would get into the flood and earthquake insurance business on a money losing basis because the risk was too high for anyone to do so on a for profit basis.

Any person who claims to be politically liberal or progressive should applaud that decision and should insist that the program continue to lose money at its present rate.

[mahatmakanejeeves]

5. The country's flood insurance program is sinking. Rescuing it won't be easy.

Retweeted by David Fahrenthold: https://twitter.com/fahrenthold

Something to remember as waters rise: The National Flood Insurance Program was already $25B in debt — before Harvey.

Link to tweet

The country’s flood insurance program is sinking. Rescuing it won’t be easy.

By Brady Dennis July 16

....
On Capitol Hill, lawmakers are scrambling to overhaul the half-century-old program. Allowing it to lapse Sept. 30 would risk disrupting the buying and selling of homes in flood-prone areas across the country.

The NFIP has long enjoyed bipartisan support, if for one simple reason. “Where it rains, it can flood, so no one in the country is insulated,” said Laura Lightbody, who directs an initiative at the Pew Charitable Trusts aimed at helping communities better prepare for flood risks. “It touches all 50 states.”

But not equally. Data shows that some of the worst flooding, and often the most frequent, has occurred along the Gulf Coast of Louisiana and Texas. Houses along the Mississippi River have repeatedly been deluged. And the Atlantic coast from Miami to Boston faces perpetual — and escalating — threats. Although there are certainly beachfront mansions affected, many homes belong to working-class Americans.

Critics have long maintained that although the NFIP was intended to encourage smarter development, its current design too often bails out people in flood-prone areas. In short, it incentivizes staying put, whatever the cost, rather than moving to higher ground. Plus it has had only limited success in discouraging development in questionable areas.
....

Brady Dennis is a national reporter for The Washington Post, focusing on the environment and public health issues. Follow @brady_dennis

[JayhawkSD]

6. I don't think you are paying attention.

If the government charged premiums that were high enough to cover losses, and that were high enough to "prevent the National Flood Insurance Program from sinking," then we would not need the NFIP because private insurance companies could and would provide flood insurance. It is precisely because the NFIP cannot charge insurance premiums high enough to cover losses that it was formed in the first place, because the taxpayers cover those losses. That was the intent and the whole point of forming the program in the first place.

The NFIP does not need rescuing, it is doing precisely what it was intended to do. Expecting it to operate in the same manner and with the same objectives as a private, for profit insurance agency is absurd.

Dennis Brady of the Washington Post is a journalist, and his job is to stir up controversy. He wants to make the government look bad because that is the whole reason of existence for the Washington Post as an organization.

Why does the Democratic Underground, devoted to liberal and progressive causes, embrace idiots like writers of the Washington Post in excoriating the things that government does that actually help people, like providing affordable flood insurance?

[mitch96]

4. I don't mind paying for flood insurance

But please be accurate.. My flood insurance (south florida) doubled when they re drew the flood maps...... INCORRECTLY and said I was in a flood zone.. My neighbor on my right and neighbor across the street did not get any increase. Seems FEMA just kinda sorta shotgunned the estimates of altitude and I got screwed..
I had a survey done and it turns out I'm 3' above what they thought and I paid a professional engineer to have the height estimate changed.. Now I don't need flood insurance, and with the revised estimate the price is HALF when I do purchase it... ugh..
m

[JayhawkSD]

7. And what would your premium have been from Farmers Insurance?

Oh wait. Farmers Insurance would not have quoted you a rate, because they no longer write flood insurance policies. Nor does any other insurance company in South Florida. And before they quit writing them they were quoting rates vastly higher than what the NFIP is quoting.

So they make a mistake now and then. Millions of people would be vastly worse off without them.

[mitch96]

8. I was paying $200/year with state farm

That was for flood and not hurricane insurance.. After the "adjustment" it went to almost $500..
NFIP now quoted me $225...
m

[JayhawkSD]

9. From the State Farm Insurance website.

"Most homeowners insurance policies, including those offered by State Farm™ do not cover damage caused by flooding. This is important to check when getting flood insurance quotes. If your community participates in the National Flood Insurance Program (NFIP), you can buy flood insurance coverage through agents enrolled in the NFIP-Direct program."

[mitch96]

10. It's been many years since I bought flood insurance from State Farm

When they pulled out of insuring property they stopped the flood insurance program. In my case FEMA took over the program and charged me the same amount of money.. It slowly went up and up until the maps changed and it doubled....
m

[Igel]

11. These are two issues.

The National FIP still undercharges what it should.

Government = people. Unless we set the bar for competent = perfection, we're going to have mistakes, and an agency responsible for millions of square miles isn't going to stress out over getting the flood plain line 50' off in one direction or another. Some people get hit with higher bills than they should, and complain; but those who are just as unjustly charged lower bills than they should be never say a word.

[JayhawkSD]

12. You make a good point, but...

I would pick a small bone with your statement that the NFIP "undercharges what it should." It charges less than the amount needed to cover losses, but I would argue that an amount sufficient to cover losses is more than what it should charge. If that is what it was going to charge, then flood insurance could be left to the commercial insurance business. The NFIP was formed to provide flood insurance at a rate that average homeowner could afford to pay.

That is the role of government; to do for the people what the people (business owned by investors, who are people) cannot do.

I suspect that you are not actually saying that the NFIP should charge higher rates, but are saying the same thing that I am, that it charges less than what a for-profit business would charge.