Flood Insurance Is Broken. Here Are Some Ways to Fix It

by Robert Klein, financialsense:

Hundreds of thousands of Americans whose homes were damaged or destroyed by flooding from Hurricanes Harvey and Irma don’t know how they will pay for repairs, rebuilding or replacement. Likewise, the nation as a whole needs a plan for fixing the deeply flawed federal system for managing and financing flood risks.

The National Flood Insurance Program insures almost five million homes and businesses against flood risks and handles related services such as flood risk mapping and floodplain management. It nearly ran out of funding before Congress voted to temporarily extend its authorization in early September. This reprieve means it can keep renewing and issuing new policies through December 8 – instead of being frozen at an inconvenient juncture.

As an expert on the structure and performance of insurance markets, I was relieved to see the program at least get patched. But I’m also concerned because lawmakers are making too little progress toward a long-overdue overhaul of the program that would make it solvent and more effective.

What’s Wrong?

As House Financial Services Committee Chairman Jeb Hensarling put it recently, Congress must “finally get serious about fixing the NFIP because it is not only broke, it is broken.”

After years of struggles, its problems worsened considerably after Hurricane Katrina in 2005. Along with other flooding programs and policies, it’s failing in four main ways.

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SGT