Wednesday, March 26, 2008
Editorial: Shifting hurricane risk to taxpayers
The National Flood Insurance Program subsidizes risky behavior. Don't expand it to cover hurricanes.
From the RoundTable blog
Read the latest entries
Everything bad about the National Flood Insurance Program -- it encourages development in flood-prone areas, pays homeowners to repeatedly rebuild where they should not and forces inland taxpayers to assume risk taken by often wealthy homeowners who choose to live near or on the coast -- would be magnified by a proposal to have the program cover wind damage.
Private insurers, even though more are getting out of hurricane coverage, oppose having the federal government move into the business.
This is a rare time when corporate interests and public interests coincide.
The push to expand the federal flood program comes from Rep. Gene Taylor, DMiss.
Taylor's home was destroyed by Hurricane Katrina, and he had to sue his insurance company to get coverage for wind damage the company said was actually flood damage, and thus covered by the federal program -- a fairly common occurrence after Katrina.
Insurance companies tried to duck their responsibility, Taylor said, and it cost the federal government billions to assist and relocate families.
"It was unjust at every level -- for the individual and for society as a whole," he said. "Insurance companies tried to screw the nation."
Taylor, apparently, wants to eliminate the middle man.
Along vulnerable coasts, insurance rates are rising tremendously. Many companies are getting out of the property insurance business in the most risky locations, such as Florida.
But why should the federal government go where private insurers fear to tread?
After Katrina, the National Flood Insurance Program had to borrow $20 billion from the federal government. It brings in only $2.5 billion a year in premiums.
It will take a very long time to pay down that debt -- and that's under the questionable assumption that another disaster won't come along before then.
Though Taylor insists his bill would require wind premiums to be set by actuaries, that has never been the case with the flood premiums.
If anything, the federal government should be moving out of the flood insurance business, not expanding into hurricane coverage.
