Wednesday, September 21, 2005

Repeal the National Flood Insurance Program - Now!

I found a superb editorial in the USA Today this morning. It's spot on and I urge everyone to write their congressmen and senators to demand this program be abolished so we can restore some common sense back into this country. This program allows people to build in environmentally senitive areas and promotes sprawl on beautiful lands. It's time to stop funding people building homes and businesses in these areas once and for all.

Here's the piece:

Katrina was a devastating storm; Rita may well become one. But it is misleading to call such hurricanes natural disasters.

Storms become disasters only if they hit population centers. Otherwise, they're of interest mainly to scientists and weather buffs but are like the proverbial tree that falls in the forest to the rest of us.

These days, however, there isn't much chance a major hurricane could come ashore in the USA and not become a disaster: 54% of Americans live within 50 miles of a shoreline, according to the National Oceanic and Atmospheric Administration. By 2025, three-quarters of the country is projected to live in such communities.

This unprecedented march to the sea has been abetted by unwise government policies that encourage living along the coast. Principal among them: the National Flood Insurance Program.

Started in 1968, federal flood insurance subsidizes development in coastal areas and other regions subject to flooding by offering insurance at bargain rates underwritten by the government.

As of last year, about 4.6 million policies were in effect with an average annual premium of $438. These premiums are nowhere near enough to cover the program's losses. Earlier this month, Congress authorized the program to borrow $3.5 billion for Katrina-related payments, an amount most experts believe is just the beginning and few believe will be repaid by property owners.

The program not only brings big government into an area better left to private enterprise, it also achieves the opposite of its goal. By lowering the cost of maintaining a home on flood-prone lands, it increases the populations in these areas. That in turn leads to more, and more costly, disasters.

According to the Heinz Center for Science, Economics and the Environment, a non-partisan think tank, development density in flood-prone areas has grown dramatically since the advent of federal flood insurance. Before its enactment, lands subject to flooding were 25% less densely developed on average than comparable land not subject to flooding. Since then, the figure has closed to 15%.

Other problems with the program:

•Passing the buck. Private insurers have an incentive to claim that most hurricane damage is caused by storm surges (which are covered by the federal flood insurance) rather than by winds (which private insurers cover). Mississippi is investigating claims that some adjusters pressured homeowners in Katrina's path to sign waivers saying that their homes were destroyed by water.

• Lack of long-term planning. The government makes little or no attempt to quantify the financial risk it is exposed to through its insurance program, which provides more than three-quarters of a trillion dollars in coverage. That makes it difficult for the public to debate what should be done to protect coastal communities.

The government does, to be sure, have a vital role to play in identifying flood-prone areas. But the actual issuance of policies should be left to the private sector.

True, that would lead to higher premiums because private insurers can't run to Congress for money to cover their losses. But then why should taxpayers in Kansas subsidize insurance for people who live in Florida? And why should those Kansans - or anyone, for that matter - want to underwrite a system that each year helps put more people and property in harm's way?

After 37 years, it's time to recognize federal flood insurance for what it is: a disaster.


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