Massive flooding spotlights need for flood insurance reform

Article By Steve Ellis

Photo By Laurie Skrivan

The record floodwaters that inundated Missouri should serve as a stark reminder that storms have become increasingly unpredictable, dangerous and deadly. This tragedy highlights the need for Congress to quickly take action and fix the nation’s federal disaster policy.

The National Flood Insurance Program, which provides flood coverage to more than 21,000 property owners in Missouri, has rung up nearly $25 billion in debt and is struggling to remain afloat. With the federal program set to expire in September this year, lawmakers on Capitol Hill should prioritize fixing the program before future storms push it further into debt.

Congress can start by passing the Flood Insurance Market Parity and Modernization Act, a bipartisan bill that passed the House 419-0 last spring. The legislation would level the playing field so that consumers can purchase private flood coverage to meet mandatory purchase requirements. More competition would result in additional consumer choice, better rates and higher coverage limits, making rebuilding easier for Missouri’s home and business owners after the next storm strikes.

It would also start shifting risk off the federal government, helping stabilize the flood program and reduce the burden on taxpayers. A recent analysis by the Reinsurance Association of America found that Congress could save the National Flood Insurance Program billions of taxpayer dollars and improve its long-term financial strength by allowing more private-sector insurers to enter the flood insurance marketplace.

Even with nearly 22,000 policies from the federal program, few Missourians have purchased flood insurance. Some residents may avoid the program because the one-size-fits-all policy fails to provide homeowners with the coverage they need at a price they can afford. Expanding the flood insurance market with more private insurance options would encourage more Missourians to purchase flood coverage, since policies could be tailored to individual properties. Also, as flood insurance becomes a more routine insurance product, more homeowners would be inclined to purchase as a part or as a rider on their existing policy.

In addition to opening the flood insurance marketplace to more private insurers, Congress should comprehensively reform the federal program and help ensure that it is sustainable for the long term.

Congress should also reform the insurance program to incentivize storm mitigation efforts. For example, the program should direct financial assistance to lower-income homeowners so they effectively mitigate measures prior to future storms. This change would lower future disaster costs and policyholders’ rates by reducing their risk rather than the current practice of wasteful premium subsidies.

Additionally, strengthening infrastructure and updating building codes would ensure that communities are better able to withstand the major storms to come. Studies show that every $1 spent on mitigation efforts leads to $4 in reduced future disaster costs. Mitigation efforts would not only save lives but would prevent costly property damage.

Weather has hit Missouri hard in the past few years. And if current climate predictions hold, Missouri will likely see more severe weather, causing additional devastation and disastrous loss. Congress should act now to reform the debt-ridden flood insurance program, before Missourians suffering from flood damage are left hanging out to dry.

Steve Ellis is vice president of Taxpayers for Common Sense and a member of the coalition.

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