Sunday, February 02, 2014

Flood Insurance? Should It Be Gutted?

As reported by the NYT  Jan 29, 2014
A major flood insurance bill was a rarity when it passed what is widely derided as a do-nothing Congress in 2012, but a year and a half later, there is now an enthusiastic bipartisan effort to gut it.
This week the Senate is expected to approve a measure that would block, repeal or delay many of the key provisions of the Biggert-Waters Flood Insurance Reform Act, which was sponsored by Representative Judy Biggert, an Illinois Republican, and Representative Maxine Waters, a California Democrat.

Tucked into broader transportation legislation, the bill had enthusiastic support across the political spectrum, from liberal environmentalists to fiscal conservatives.
But Ms. Waters is now leading an effort in the House to gut the legislation she sponsored. And this week, the Senate is expected to pass a measure that would stymie the law, an effort that has support from across the political spectrum, from prominent liberals like Senator Elizabeth Warren, Democrat of Massachusetts, to conservatives like Senator Marco Rubio, Republican of Florida.

What happened?
It appears to be another Washington story of unintended consequences, and a warning, environmentalists say, of the rising costs of climate change. Most important, the bill may be a preview of the fights to come over who will pay those costs.

The Biggert-Waters measure sought to reform the nation’s nearly bankrupt flood insurance program, ending federal subsidies for insuring buildings in flood-prone coastal areas. Over the past decade, the cost to taxpayers of insuring those properties has soared, as payouts for damage from Hurricanes Katrina, Irene, Isaac and Sandy sent the program $24 billion into debt.

The aim of the measure was to shift the financial risk of insuring flood-prone properties from taxpayers to the private market. Homeowners, rather than taxpayers, would shoulder the true cost of building in flood zones.

Deficit hawks liked the idea because it would curb a rapidly rising source of government spending. Environmentalists liked the bill because they said it would reflect the true cost of climate change, which scientists say is ushering in an era of rising sea levels and more damaging extreme weather, including more flooding.

But a year after the law passed, coastal homeowners received new flood insurance bills that were two, three, even 10 times higher than before.

In Beach Haven West, N.J., for example, Diane Mazzuca, a furniture showroom designer, had been paying $595 annually for flood insurance on her $90,000 home. After Biggert-Waters ended federal flood insurance subsidies last June, she got an updated bill — for $4,492.

“Our house never flooded before Sandy,” Ms. Mazzuca said. “The new insurance statement said we were in the storm surge line.”

Ms. Mazzuca is still struggling with her insurance company over payments to repair damage to her home from Sandy, and cannot pay the costs on her own, or the new insurance rates.

“I’m going to have to walk away from my house and my life savings,” she said.

Ms. Mazzuca has plenty of company. The insurance rate increases hit many of the 5.5 million coastal home and business owners covered under the National Flood Insurance Program, and came as the Federal Emergency Management Agency, which runs the program, was updating flood maps and placing thousands of homes inside flood zones for the first time. Last summer and fall, homeowners near coasts, rivers and wetlands saw their insurance rates soar and their property values plummet.
The homeowners’ frustration erupted into a grass-roots lobbying campaign to roll back the Biggert-Waters act, and lawmakers in Washington quickly got the message.

“Never in our wildest dreams did we think the premium increases would be what they appear to be today,” Ms. Waters said.
Similarly, in Louisiana, where hurricanes and flooding have devastated coastal residents and the new insurance rates were viewed as a further affront, Senator Mary L. Landrieu, a Democrat who faces a tough re-election fight this fall, paid close attention to angry constituents.
Ms. Landrieu teamed with Senator Robert Menendez, Democrat of New Jersey, and Senator Johnny Isakson, Republican of Georgia, to sponsor a bill that would delay most insurance rate increases by four years.

“The Biggert-Waters bill is not going to save the flood insurance program. It’s going to collapse it,” Ms. Landrieu said. Supporters of her effort to delay Biggert-Waters say that the spike in flood insurance rates will drive homeowners out of coastal zones altogether.
But budget watchdogs, insurance groups and environmentalists are fighting the effort. They say that while the original Biggert-Waters law was imperfect, the effort to delay it would bankrupt the program and leave coastal property owners more vulnerable to future damages, and that taxpayers would be forced to pay the bill.

On Monday, the White House released a statement criticizing the effort to gut the law, saying it would further erode the financial position of the national flood insurance program, and that it would reduce the government’s ability to pay future claims. But the administration did not threaten a veto.
The Senate bill is expected to pass on Wednesday or Thursday, after which it will head to the Republican-controlled House.

Although the effort there is being led by Ms. Waters, she already has more than 180 co-sponsors from both parties, and House Speaker John A. Boehner, Republican of Ohio, indicated that G.O.P. leadership may consider the effort.


Nick Sollogub said...

I am torn on this article. I believe that people who are going to take the risk of living in an area that they know is in a place where it is very likely that mother nature may destroy their homes should have to pay as a result of it. If this means they have to pay higher premiums on their insurance, which is mandated by law that they have, then so be it. But at the same time during times of crisis we see the government prohibiting companies from spiking their prices and taking advantage of people in need. So this entire article is a slippery slope. One thing seems to be certain and that is our increasingly violent weather is going to persist and even grow stronger as time goes on due to climate change. So at what point do people pack it up and move to a safer area? Certain people will always "ride out the storm" or "go down with their ship" and I think this is fine, but they should not be forced to pay into insurance, and also if their houses get destroyed from the storms or nature, then they should not be able to turn to any one for help.

Nick Sollogub

Leah DeEgidio said...

People who are buying property or a house in an area that is labeled as within a storm surge line need to accept the consequences of a natural hazard. For some like Ms. Mazzuca, they aren't told by their insurance company that they are living in such a high flood risk place until after a surprise super storm. Sandy left many with nothing but extremely high insurance payments and a destroyed home. Education about these consequences will be the only incentive to take precautionary actions. If this weather can be expected again due to this issue of climate change, people need to know how to plan for the future

Anonymous said...

This issue shows the extremity of the current environmental crisis. We are experiencing more extreme storms and sea levels are set to rise exponentially over the coming years. Homeowners with coastal properties need to think responsibly and plan for a safe future. In order to protect themselves, their families, and their assets it is imperative that they heed the warnings from environmentalists everywhere. I do believe no one should have to pay thousands of dollars a year to insure their homes, but I see this as an easy fix. Homeowners should be prepared to sell their coastal properties and move elsewhere, pay the increased insurance rates, or face the consequences.

-Haylei P.

Cynthia Romero said...

I strongly believe that if you decide to buy a home and live in a dangerous area then you need to accept the consequences. Should they be forced to buy insurance? No, it is their decision just like the decision to move there. Should they get their insurance revoked? No, but I do think they should pay a higher rate.

Anonymous said...

I do believe that it is unfair for the people currently living within a flood zone to have to pay for the true costs of climate change. However, that being said I think that if you are willing to accept the associated risks of living in an area that you know could possibly flood, you should then be required to prove to your insurance company that you can actually take on those risks, with some sort of financial statement. And if you cannot afford to take that risk, then there should be government assistance in regards to moving people out of areas labeled as flood zones. Although I do realize this solution may be a bit unrealistic, considering the amount of time and money it would take to move all the residents out, I do think it would be beneficial for the government to set aside a task force that would study both sides of the equation and determine whether or not re-location could be a feasible solution.

Gina May

Anonymous said...

The truth of the matter, to me, is that really, no matter what legislation does, as climate change continues on its path, storms are only going to surge harder, and flood damage will only get worse in the coastal areas. It is hard to say who should pay for the damages done to the homes in these flood zones, because while these people should have a right to live where they want to live, we as a worldwide community are contributing to the disasters taking place there. The root of the problem is the worsening weather, and until we deal with that, someone will have to pay for the damages. Personally, I think that the flood lines should be placed in places that flood frequently, not just one time. That way, the people who are living in unsafe conditions anyways may reconsider their living conditions if they had a cost that went along with the constant flooding. It would cause for less people living where it is not safe, and less of a cost on taxpayers. However, either way the legislation goes, someone is going to have to pay for the damages that we are helping to cause in the first place.

Leanna Molnar

Dylan Hirsch said...

This article is an extremely interesting look about how our government is dealing with the financials of a changing climate. The recent hurricanes and storms that have swept across the nation has caused billions of dollars in damages. The government needs to decide who will shoulder this cost; the public or the private sector. At first both environmentalist and liberalist were supportive of a government bill that would make the public sector responsible for these payments, but as the program went into $24 billion dollars of debt, this rationale is changing. I think this article highlights the very real problem of climate change, and is giving scope to the conversation that is taking place in our government on the possible solutions and adaptations that will need to take place.


Anonymous said...

This article outlines an interesting take on the problem of financial responsibility in our nation. Because we make a choice to live where we want, does that mean we should be responsible for damages, which, as a result of climate change, may be increasing? Or is it the public taxpayers that get the burden of these events?

In my opinion, because storms and natural disasters are going to continue to occur more often, we need to start planning ahead. If one lives in a coastal region, the reality is that they need to anticipate possibly paying higher insurance rates because they will be living in a more vulnerable area. And because this is our own personal choice, should we complain about having to paying more money? Because of the environmental crisis that is occurring, these are the things we need to think about for our future.

-Kaylee Looper

Anonymous said...

Whether or not the financial burden of a natural disaster is distributed to the private sector or the public is really only the tip of the iceberg. And this issue will only grow more urgent as the climate conditions continue to change and the problem of climate change is ignored. Working first hand in New Orleans and Rocky Point has given me the first hand experience of a natural disaster, and the destruction it leaves in its wake. It's hard for me to place full responsibility on the homeowners, after seeing the destruction of these super storms, especially in impoverished areas. However, these storms will only become much more frequent and severe and the U.S government wont be able to fund the relief efforts needed. Living on the coastlines and in "high-risk" areas come with sacrifices and one of them should be having to pay a higher premium. Homeowners should plan their futures accordingly to their income and to the warnings of environmentalists. If a homeowner chooses to stay in their home and not pay the increased insurance rates, then they choose to take full responsibility of any potential damage to their home in the future. I feel the most important issue is the belief and understanding in climate change. Every homeowner should understand that a super-storm like sandy or Katrina may not be a one time thing. And as our climate changes these storms may become much more frequent.

Aleia Isoldi

Melis Temelli said...

The article goes through the flood insurance supporting laws in the United States. The efforts by the government to cut government subsidies for flood insurance is criticised, for the results of the cut would have devastating effects for households unable to meet the insurance premia demanded for floods in the country. While, the efforts to legislate such subsidies are understandable, it seems that certain companies, lobbies and politicians aim at using these efforts not on behalf of the taxpayers nor the budget, but for their own interests. For instance, insurance companies sees the initiatives as an opportunity to increase the insurance payment rates much higher than the amounts to be deducted by the government, a move that would lead to change of hands for many houses located at flood risk-prone regions on behalf of those that can afford high insurance costs. While some others are on behalf of cutting the subsidies so as to decrease budget deficit, they cannot see the political and social costs of the decision. This is partially the case for environmentalists that think the change would let people recognise the importance of climate change, for the victims of the change would be ordinary people at the end and this would probably not have positive ideas regarding accepting the reality of clime change.

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