Brian Defferding
08-26-2010, 01:07 PM
Huge damning article in USA Today (http://www.usatoday.com/money/industries/insurance/2010-08-25-flood-insurance_N.htm) on the large loss of FEMA's federal flood insurance program. Here is the first part of it:
In Wilkinson County, Miss., a home has been flooded 34 times since 1978.
Extraordinary as the damage may be, even more extraordinary is that an insurer has paid claims every time, required no flood proofing, never raised premiums after a claim and vowed to continue insuring the house. Forever.
The home's value is $69,900. Yet the total insurance payments are nearly 10 times that: $663,000.
It's no surprise that the insurer faces huge financial problems.
The insurer? The federal government.
The Mississippi home is one of a growing number of repeatedly flooded properties whose owners have collected billions of dollars from an insurance program regulated by Congress and run by the Federal Emergency Management Agency.
FEMA's National Flood Insurance Program is the nation's main flood insurer, created by law in 1968 as private companies stopped covering flood damage. The program insures 5.6 million properties nationwide and aims to be self-sustaining by paying claims from premiums it collects.
Instead it's running deeply in the red. A major reason, a USA TODAY review finds, is that the program has paid people to rebuild over and over in the nation's worst flood zones while also discounting insurance rates by up to $1 billion a year for flood-prone properties.
Along with the huge losses from Hurricane Katrina, the generous benefits have forced the program to seek an unprecedented $19 billion taxpayer bailout.
I remember after Katrina when a large private insurer stopped offering insurance in some southern regions, they were criticized for "abandoning" residents. Well, this is what happens when people feel entitled to live in dangerous flood-prone zones. When an insurer refuses to insure your house due to it being too risky, that should tell you something: Don't live there.
In Wilkinson County, Miss., a home has been flooded 34 times since 1978.
Extraordinary as the damage may be, even more extraordinary is that an insurer has paid claims every time, required no flood proofing, never raised premiums after a claim and vowed to continue insuring the house. Forever.
The home's value is $69,900. Yet the total insurance payments are nearly 10 times that: $663,000.
It's no surprise that the insurer faces huge financial problems.
The insurer? The federal government.
The Mississippi home is one of a growing number of repeatedly flooded properties whose owners have collected billions of dollars from an insurance program regulated by Congress and run by the Federal Emergency Management Agency.
FEMA's National Flood Insurance Program is the nation's main flood insurer, created by law in 1968 as private companies stopped covering flood damage. The program insures 5.6 million properties nationwide and aims to be self-sustaining by paying claims from premiums it collects.
Instead it's running deeply in the red. A major reason, a USA TODAY review finds, is that the program has paid people to rebuild over and over in the nation's worst flood zones while also discounting insurance rates by up to $1 billion a year for flood-prone properties.
Along with the huge losses from Hurricane Katrina, the generous benefits have forced the program to seek an unprecedented $19 billion taxpayer bailout.
I remember after Katrina when a large private insurer stopped offering insurance in some southern regions, they were criticized for "abandoning" residents. Well, this is what happens when people feel entitled to live in dangerous flood-prone zones. When an insurer refuses to insure your house due to it being too risky, that should tell you something: Don't live there.