Flood insurance overhaul strategies

Congress appears to lack confidence in the National Flood Insurance Program and has taken to keeping it alive with frequent reauthorizations. This has been called ‘kicking the can down the road.’ Legislators are now debating the next reauthorization deadline on May 31 for the program run by the Federal Emergency Management Agency. Each reauthorization brings out the programs critics who promote their strategies to fix the insolvent program. Others point out that the cost to bail out the program every year is far less than what the country spends on natural disasters.

Critics are demanding change to the NFIP. These are some of the overhaul strategies recommended by legislators and other advocates at the March 13 Congressional hearings of the House Committee on Financial Services:

1. Pro Private market: Encourage more coverage by private insurance market, which has developed better systems of predicting how properties will be affected by flooding.

2. Anti Private Market: Keep private insurers to a minimum so they don’t cherry pick all the lower risk property.

3. Affordability: Make federal insurance affordable to lower income property owners.

4. Not just in the high hazard zone: Encourage people outside high hazard flood plains to buy flood insurance, given that much of recent flooding has occurred in supposedly non-hazard areas.

5. Mapping: Improve the quality, currency and granularity of flood plain mapping. Granularity means provide information on maps that shows the cost of insurance and flooding history for each property.

6. Building bans: Require nationwide what Florida already does, which is to mandate flood-resistant construction (elevated) on all new buildings in the high hazard zone.

7. Mitigation: Save money in the long run by spending more tax dollars helping people in high hazard areas to elevate their property above the mean high water line.

9. Debt: Forgive more debt in the program. Don’t expect it to pay for itself.

10: Climate change: Include factors such as sea level rise and increasingly severe storms to calculate true risk of flooding on each property.

11. Pro-grandfathering: Don’t put longtime property owners at risk of huge increases in premiums.

12. Anti-grandfathering: Require long-time owners of high risk property to face full cost of protecting their property.

13. Claims processing: Speed up the process.

14. Protection from bad actors: When allowing contracting insurance agencies to process claims during a crisis, ensure they do not have perverse incentives to undervalue claims. This leads to extravagant legal costs paid by FEMA to unscrupulous lawyers.

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