I’ll post this anonymously, but I think it is right on the money (pun intended). It always boils down to the money, right?
“One of the major reasons the NFIP [National Flood Insurance Program] is billions in the hole for billions is due to the fact the NFIP historically has never based their premiums on true actuarial rates for the flood risk. The NFIP debt did not exist prior to the 4 Florida hurricanes of 2004 and, of course, hurricanes Katrina and Rita of 2005. There was just not enough taxpayer funds in the till when so many large events occurred in sich a short period of time. The federal flood policy isn't a perfect policy by far (I have adjusted flood claims for over 40 years) but, IMO, it is still the best bang for the buck when it comes to flood coverage.
“The NFIP is currently attempting, through the Risk Rating 2.0 initiative, to raise premiums people pay for flood insurance to what they should have been all along. The NFIP is meeting an enormous amount of resistance from Senators and Congress for this move but if the US Taxpayer wants the NFIP to pay back their debt and become solvent, higher premiums are the only way to go.
“RR20 is backfiring on the NFIP in that many homeowners who have paid off their mortgages are dropping their flood coverage which will force them into other gov't assistance programs (FEMA Disaster assistance grants are currently capped at $37K or SBA loans which must be paid back) when their properties eventually flood (or abandon them completely). NFIP policies-in-force counts (PIF) are decreasing in many flood prone areas leaving many people financially defenseless if their community floods.
“The NFIP was created back in 1968 because private carriers began to exclude the flood risk from their policies - it was too costly when an event occurred and an insurance carrier had a concentrated number of exposures (residences and businesses) in the affected area. The feds had to step in to help the people living in flood zones.
“Over the past decade we have seen hurricane deductibles rise and policy coverage exclusions and limitations increase when it comes to disasters. Law suits, public adjusters, increased costs of construction and higher policyholder expectations have all combined to send claim costs through the roof and carriers just don't want the risk any longer.
“Should we have a national disaster policy to include floods, tropical events and such? Maybe - that calculation is above my pay grade. Here in Florida, it's looking like we are 10 years or a few more big weather events away from all homeowners being forced to buy Citizens (our state-run insurance fund and insurer of last resort) wind and flood coverage.”
