Should the fed be in the flood insurance biz?

[KFC911]

Please don't make this a PARF thread....

Just like "high risk" folks before ACA, private carriers won't touch flood insurance...it's backed and paid for with our tax dollars.

Discuss...

[pavulon]

no.

[wdfifteen]

Hard to keep this out of PARF. If the Feds won't provide health insurance for the people health insurers won't touch, why provide flood insurance for people insurers won't touch? Chronically ill people don't have a choice about their health. People who live in flood prone areas can choose not to live there. Priorities seem backward.

[legion]

Flood insurance creates an perverse incentive. It actually encourages development in areas that flood because it spreads the risk to people who didn't make such a choice.

That said, I don't think the flood insurance discussion is particularly relevant to Houston. Any place that experiences 52" of rain in 72 is going to flood. It's basically a statistical outlier that's something like 4 standard deviations from mean. (That's my geeky way of saying the chances of such an event are so remote that no one would never plan for it.) Actually, if there was a way to separate such rare events from places that flood over and over, it would be a risk insurers would probably be willing to cover for a very modest premium.

[KFC911]

Chris, I agree with regards to the Houston area, but that obviously brings it to the forefront. I was actually thinking about the coast of NC. When I was a kid, the Outer Banks was mostly undeveloped....or just disposable "fishing shacks", etc. Now it's fully developed with multi-milllion $ McMansions. It's not a matter of "if".... it's "when"

[drcoastline]

I am in the insurance business along the NJ coast. Flood insurance comprises probably 60% of our business. Statistically a property, any property is 25% more likely to be damaged by flood waters than any other peril. Flood encompasses more than just what we see happened in Houston or what occurred after Sandy, etc. Historically insurers would not touch flood because of the elevated risk of loss. As a result the Fed enacted the NFIA of 1968.

Ironically just this past year the private market mostly through Lloyd's began writing flood insurance, cherry picking the low risk properties (in my area buildings constructed after 1972 and to NFIP standards). Houston being a low risk area would have been exactly what they targeted. It will be interesting to see what happens with private flood moving forward after this.

Also, what many of you may not know is, if you live in a flood zone and have a federally backed mortgage are mandated to carry flood insurance. So if the fed doesn't renew the act which is up for a vote. Everyone in a flood zone with a mortgage will be in default. Banks could call those loans due.

[GH85Carrera]

The Feds need to get out of so many things, and lood insurance is one. Amtrack is another. Both are giant bondoogles that loose money by the BILLIONS.

Amatrack needs to be a private business, if it can't make a profit at the current prices charged for the riders, raise the prices. Same with flood insurance. If it costs too much for the insurance, DON'T BUILD there. There are houses along the cost that have been rebuilt over and over and over, on taxpayer money just so rich folks can live on the beach.

[group911@aol.co]

Originally Posted by GH85Carrera

The Feds need to get out of so many things, and lood insurance is one. Amtrack is another. Both are giant bondoogles that loose money by the BILLIONS.

Amatrack needs to be a private business, if it can't make a profit at the current prices charged for the riders, raise the prices. Same with flood insurance. If it costs too much for the insurance, DON'T BUILD there. There are houses along the cost that have been rebuilt over and over and over, on taxpayer money just so rich folks can live on the beach.

I suppose you could say the same about the Post Office?

[drcoastline]

Originally Posted by GH85Carrera

The Feds need to get out of so many things, and lood insurance is one. Amtrack is another. Both are giant bondoogles that loose money by the BILLIONS.

Amatrack needs to be a private business, if it can't make a profit at the current prices charged for the riders, raise the prices. Same with flood insurance. If it costs too much for the insurance, DON'T BUILD there. There are houses along the cost that have been rebuilt over and over and over, on taxpayer money just so rich folks can live on the beach.

Not defending the Feds because I do agree they need to get out of a lot. In a minor defense of the flood program. Through the years rates were arbitrarily low and subsidized by tax payer dollars. After Sandy that all changed. They have been raising rates by 10% per year across the board. They have also begun actuarial rating which means properties will be rated based on their risk (eventually). They are also redoing all the flood maps so many of the zones will be changing.

Again, private flood is going to be interesting to watch. Not only were they cherry picking the best properties but they were also charging far less than the NFIP program. We have had properties with $250,000.00 in coverage paying $5,000.00 per year in flood insurance through the NFIP switch to private at $1,500.00.

[Reiver]

Why should the Govt. Insure those in flood zones/plains and on the Ocean front? Not the tax payers job to insure homes built in areas that can/will be damaged by normal storm sequences.

[Tobra]

^this^

I personally know of several homes that have been flooded and rebuilt 3 or more times.

[widebody911]

Originally Posted by Tobra

^this^

I personally know of several homes that have been flooded and rebuilt 3 or more times.

https://www.nrdc.org/experts/rob-moore/flood-rebuild-repeat-need-flood-insurance-reforms

One home in Batchelor, Louisiana flooded 40 times and received a total of $428,379 in flood insurance payments.

Sounds like a scam to get the construction dollars rolling in.

[id10t]

Originally Posted by Reiver

Why should the Govt. Insure those in flood zones/plains and on the Ocean front? Not the tax payers job to insure homes built in areas that can/will be damaged by normal storm sequences.

Thats the thing though. Normal storm vs "Storm of the Century".

I can see where splitting coverage could work - if there was a way of defining "normal" vs "who would think this would happen".

[Reiver]

Originally Posted by id10t

Thats the thing though. Normal storm vs "Storm of the Century".

I can see where splitting coverage could work - if there was a way of defining "normal" vs "who would think this would happen".

Yes, the Govt. will always assist in times of unique problems' as in Harvey but why Govt. Insurance? The Govt. should not be in that business.
Every home owner should know if his home is in a risk area...100 year/500/ whatever and take the appropriate action.
If you live on the Ocean or nearby, by a river, in a 'plain' without adequate run off area you will eventually have some kind of damage.
This isn't rocket science and I've seen the homes on the outer banks destroyed/rebuilt/destroyed/rebuilt with Govt. funded insurance...that is wrong...and the majority are not full time residences but vacation homes...

[74-911]

Originally Posted by Reiver

....This isn't rocket science and I've seen the homes on the outer banks destroyed/rebuilt/destroyed/rebuilt with Govt. funded insurance...that is wrong...and the majority are not full time residences but vacation homes...

The thousands of homes you see being flooded are not vacation homes on the outer banks, most are the homes of hard-working Americans, many thousands of whom work in the petro-chemical industries. Somewhere between 25 and 30% of the total petrochemical industries in the US are located between Corpus and Beaumont/Port Arthur. Let's tell all those people no flood insurance is available and no help will be offered in your house is destroyed. Yes, there are people who take advantage of these programs and and changes need to be made to stop the abuses but the vast majority of the people whose lives are being destroyed are not in that category.

They just need help and only the govt. has the capability to help. If we go the way this thread leans.... welcome to Haiti...

[Reiver]

Originally Posted by 74-911

The thousands of homes you see being flooded are not vacation homes on the outer banks, most are the homes of hard-working Americans, many thousands of whom work in the petro-chemical industries. Somewhere between 25 and 30% of the total petrochemical industries in the US are located between Corpus and Beaumont/Port Arthur. Let's tell all those people no flood insurance is available and no help will be offered in your house is destroyed. Yes, there are people who take advantage of these programs and and changes need to be made to stop the abuses but the vast majority of the people whose lives are being destroyed are not in that category.

They just need help and only the govt. has the capability to help. If we go the way this thread leans.... welcome to Haiti...

Ok, my example was not meant to include Harvey obviously...however, why should tax dollars be involved with anyone's home insurance?
If your home had once been flooded would you stay there...rebuild? Florida coast, the whole eastern and western coast, gulf coast gets Fed subsidy...why?
I know the vast majority of those in Texas are not in that category and....the op did not directly reference this disaster.
Take New Orleans and that area....many homes built below sea level....really?
If the Govt. does not provide flood insurance that is no reason to believe flood insurance will not be available.....it will simply not be Federally subsidized.
Tell me why the Govt. should subsidize home insurance...

[74-911]

Originally Posted by Reiver

...... If the Govt. does not provide flood insurance that is no reason to believe flood insurance will not be available.....it will simply not be Federally subsidized.
Tell me why the Govt. should subsidize home insurance...

Simple, If no subsidy, only the more wealthy will have flood insurance. Flood insurance might be available but at a price few working people can afford. No private insurer wants to write flood insurance. It is all a matter of economics:
High ground that isn't likely to flood is very expensive therefore housing and apartments for lower incomes are built on lower land, the lower the income, the lower the land. The maximum NFIP insurance for a house is $250K for the house and $100K for the contents. If you want more than that you go on the private market for any additional insurance and hold your breath when you get the quote.
Maximum insurance in an area with little to no threat of flood will cost about $450 / year. That same insurance in a flood zone can cost over $2500 (depends on the probability of that home being flooded.) For a working family just struggling to keep a roof over their family's head and feed them, $2500 a year is a lot of money. This is in addition to the standard homeowners insurance (and TX has about the highest homeowner rates in the county). AND if you live in a coastal county (other than Harris*) you also have to buy a separate windstorm policy as standard HO policies in those areas exclude windstorm damage (high winds, hail, etc.). Very similar to Flood, windstorm is CATPOOL insurance and all insurers who write HO in TX have to also write windstorm.
When I lived near Rockport/Port Aransas where Harvey made landfall I carried standard TX HO policy, a separate windstorm policy (which was more than the HO) and a NFIP flood policy. Many people just can't afford all that even though they may really need it someday.... you just take your chances.

[group911@aol.co]

Wait a second. This is making way too much sense. You mean people live in a place they can afford close to companies that employ them? Crazy idea there.

Originally Posted by 74-911

Simple, If no subsidy, only the more wealthy will have flood insurance. Flood insurance might be available but at a price few working people can afford. No private insurer wants to write flood insurance. It is all a matter of economics:
High ground that isn't likely to flood is very expensive therefore housing and apartments for lower incomes are built on lower land, the lower the income, the lower the land. The maximum NFIP insurance for a house is $250K for the house and $100K for the contents. If you want more than that you go on the private market for any additional insurance and hold your breath when you get the quote.
Maximum insurance in an area with little to no threat of flood will cost about $450 / year. That same insurance in a flood zone can cost over $2500 (depends on the probability of that home being flooded.) For a working family just struggling to keep a roof over their family's head and feed them, $2500 a year is a lot of money. This is in addition to the standard homeowners insurance (and TX has about the highest homeowner rates in the county). AND if you live in a coastal county (other than Harris*) you also have to buy a separate windstorm policy as standard HO policies in those areas exclude windstorm damage (high winds, hail, etc.). Very similar to Flood, windstorm is CATPOOL insurance and all insurers who write HO in TX have to also write windstorm.
When I lived near Rockport/Port Aransas where Harvey made landfall I carried standard TX HO policy, a separate windstorm policy (which was more than the HO) and a NFIP flood policy. Many people just can't afford all that even though they may really need it someday.... you just take your chances.

[Tervuren]

I don't see how you can say "please don't make this a parf thread", when this is policy - politics.

[Tobra]

They really need to change up the terminology. There have been "hundred year floods" at least three times in the last 25 years in Southeast Texas.

If it is in the 100 year flood plain, and they have a mortgage, the lender will compel them to have flood coverage. Jack, you and Mr Reiver are talking about two different things.