FEMA Administered Flood Insurance, Is it a Success?

How do you measure success?

by Eric Holdeman / September 1, 2016

There have been plenty of problems associated with the National Flood Insurance Program. The most significant and the fixes put in place to correct them are covered in this article, A closer look at flood insurance, FEMA's reforms, lessons learned after Sandy missteps.

The article addresses the administration of the program — which as reported is being done better and in a more expedited manner — thank you 60 Minutes for shining a light on the issues that would not have the same level of attention without the media spotlight being focused on the homeowners battling to get their claims settled.

Roy Wright is an able administrator, and it will be interesting to see where he ends up in six months, once the administration changes over and all the political appointees have submitted their letters of resignation. 

The real question is, "Is the National Flood Insurance Program a success?" I see the basic issue and the measuring tape to be applied to the program is, "Is it self-sustaining?" The answer there is no. Congress had the chance to end an entitlement program that is only going to grow bigger and bigger as more areas become flood prone and losses mount and the premiums collected don't cover those losses. They acted to increase premiums over time and then got blow-back from policy holders who wanted a bargain insurance program that allows them to live in areas that are prone to disaster. They love the sound of water, except when it is rushing into their homes.

The bottom line is that other tax payers are bailing out people who are either choosing to live near a hazard or are trapped living near a hazard because of their economic means. As I see it, with climate change, rising seas, more severe weather with more moisture falling during intense storms, the number of claims and policies will only grow. Each policy creates the potential for more liability to the federal budget. None of the above will be addressed until we reach a budget calamity when such behaviors and beneficence can no longer be afforded. 

At that point, property values in those areas will plummet even more than the general real estate market that will be in a free fall at the time due to the government's inability to meet its debt obligations. Then, that is when the piper will finally need to be paid. At that point you don't want to be the property owner or the lending bank.

On that happy note, enjoy the first day of September!

 

Claire Rubin shared the link above.