Jenkins, "Natl Flood Insurance Program, Actions to Address Repetitive Loss Properties,"
Jenkins, "Natl Flood Insurance Program, Actions to Address Repetitive Loss Properties," – SK
Introduction – floods are bad and cause lots of damage. From 1992 to 2001, they caused $55B in damages and killed 900 people. The govt paid out $7.7B in claims.
FEMA is part of Dept of Homeland Security (DHS), and is the #1 federal agency that helps with floods.
Their NFIP has helped to minimize/mitigate damage/financial impacts – saving $1B a year through improving floodplain management and setting building standards.
But what about repetitive loss properties – where 2 or more losses occur greater than $1,000 each in a 10-yr period?
Testimony provides perspective on:
FEMA’s approach to mitigating flood-related losses;
the effect of repetitive losses on NFIP;
recent actions taken/proposed to address impact of repetitive loss properties.
FEMA uses many approaches. NFIP identifies flood prone communities; makes flood insurance available; provides funding for mitigation planning activities before and after floods occur.
Repetitive loss properties are a large portion of claims. Only 1% are insured by the program while accounting for 38% of claim costs historically.
FEMA’s new strategy is to target the most frequent offenders and either phase out cvg or begin charging full and actuarially based rates.
Background – floods are bad! In 1968 – NFIP began.
FEMA Has Sought to Minimize Flood-Related Losses Through the NFIP and Various Mitigation Grant Programs – FEMA is good. Lots of political horn-tooting.
“Government Insurers Study Note,” CAS Study Note, May 2006 – W
Introduction – 5 reasons for govt participation (and evaluation):
Filing Insurance Needs Unmet by Private Insurance – sometimes insurance is either unavailable or unaffordable in the private market. The govt can step in with its financial capacity and subsidize losses through taxing all taxpayers even if they don’t benefit from the insurance; or through charging less than the actuarial cost.
Sometimes needs change. In 1968, the Fed Crime Insurance Program was intended to help with crime. As loss prevention methods were put into place, the private market was able to set rates below the govt, and the program expired in 1995.
Compulsory Purchase of Insurance – necessary in Auto and WC since w/o cvg, an offender may not be able to meet their legal liability obligations. Compulsory insurance leads to the involuntary market.
Convenience – sometimes a govt can better provide for insurance. But if the private market is willing and able to provide a reasonable market, the govt program should not exist just because it’s more convenient.