Problems with the National Flood Insurance Program

The National Flood Insurance Program, run by FEMA, comes up for renewal again in September. There have been several lapses in the program in the past few years because it gets used as a political football. Members of congress who are NOT in flood-prone states hold up their votes to force others to support their particular bills and projects. Congress is trying to start work early on the process, but there are several obstacles.

The biggest obstacle is that the whole FEMA Flood Insurance program, both here in New York and around the country, has been losing money for years, where it is supposed to be self-supporting. Naturally that means higher rates but that is not a very popular idea with members of congress.

Another area they have been looking at is whether catastrophic windstorm (hurricanes) should be added to the flood insurance program. Hurricanes are not so much of an issue in the Midwest where they are experiencing record flooding because of record snows this past winter. But here on Long Island and all along the east coast, hurricanes are a HUGE issue and something that needs to be addressed.

So some politicians want to add wind coverage to the flood insurance policy. But others are against it for several reasons. First, it is available in the private market and our system of government is based on private business wherever possible. But also, if they have been losing money on the flood insurance, chances are they would just lose even more money if you added windstorm coverage.

Today the GAO (General Accounting Office) issued a report that severely criticized the management of the National Flood Insurance Program, and says that if they don’t make significant changes, they will never become profitable. So again, the fear is that if they were to add windstorm coverage, the program would lose even more money.

I just hope they figure it out quickly enough that the basic program is renewed in September.