70: New Flood Insurance Law Congressional Dish

In March, the President signed into a law some changes to our flood policy law. What is our flood policy law in the United States? How did we change it? Are the changes good? In the United States, we have a nationalized flood insurance industry. The question becomes then, does our flood insurance system have protections in place to make sure that our tax money is protected? Does is make the people in flood zones pay enough to cover the replacement of their homes? Do the rules make sense? Unfortunately, the answers to these questions are all the same: No. The was because the to offer flood insurance after recurring, expensive flooding of the Mississippi River in the 1960s. The refusal of the private sector to provide flood insurance, a product that was in high demand by people in flood zones, left the government with the option of either bailing out flood victims or creating an insurance program itself, so that people in flood zones would at least chip into the pot of money that would inevitably be used to rebuild after floods occur.  The National Flood Insurance Program is managed by FEMA and has three main goals: To provide flood insurance To improve flood plain management To develop maps of flood hazard zones However, because of this dilution that private sector involvement is a good thing in it’s own right, private insurance companies manage our flood insurance program even though .  But this sweet deal isn’t quite sweet enough for the private market as they still want out of the program.  “The main reason carriers have been leaving the National Flood Insurance Program is #1, the profit margin is very slim. We receive approximately 30% for administering this program. Out of that 30%, we pay our agents 20%. We then pay state premium taxes of of 2%, which leaves us 8 points to manage this program and to pay for all of our costs.  - Flood insurance is . It’s still optional for everyone else and many people opt not to buy it, even though they’re in a flood zone. However, even the people required to get flood insurance as a term in their mortgage agreement, often just let the policy lapse once they’re in their home or business. With only the truly responsible paying into the program, we end up paying through emergency FEMA funds to rebuild buildings for people who chose not to insure their property. Smart freeloaders know that the government will pay for them either way.  Despite , flood insurance pretty much paid for itself until 2005, the year of Hurricanes Rita, Wilma, and Katrina. After that year, the flood insurance program went from pretty much solvent to .  Despite the debt, as of 2012, the flood insurance program was still only collecting about $3.5 billion in premiums. , who assume none of the risk and merely sign people up for a profit. One of the reasons that premiums are so low is because with flood insurance. These people can of their own premiums, with and rebuilding their homes - often in the same exact spot where it was destroyed.  For example, . The home, valued at $183,000 has cost us $1.47 million to repeatedly repair and rebuild.  Another problem is that local communities often fight flood prevention measures. Communities in New York and New Jersey have fought recommendations by the Army Corps of Engineers to put up sand dunes on the beaches to protect from ocean flooding. Their reason? They might block ocean views.  Another example is in Tuckerton, NJ, which on the shore and/or relocate them to somewhere outside the flood zone. They didn’t bother and Hurricane Sandy wiped out almost half the homes in their community, except for the few that were elevated by individual, responsible homeowners.  Another huge issue that we’re having with the flood insurance program is that our . Now, what we’re seeing is that communities that are newly placed into flood zones by updated maps are getting pissed and demanding the maps be redrawn. They insist they are not in flood zones