Katrina’s 3 R’s – Repetitive loss, Repetitive fraud and Repetitive fk-ups!

Despite all the face-saving media spins and agency testimony to the contrary, the NFIP’s “repetitive loss”  properties are the combined result of repetitive fraud and repetitive fk-ups – and it’s past time for FEMA to stop the face-saving cover-up, man-up and address these two very real problems.

Sun Herald Reporter Geoff Pender recently asked current FEMA administrator Craig Fugate, “What, if anything, is being done to improve the National Flood Insurance Program?”

I wanted to start with an overhaul of FEMA regulations and policies first, because the law itself has a lot of what I would call flexibility, in many cases, but our administration and rules and policies are restrictive.

“Restrictive”?  It was the agency’s loose-as-a-goose administration of the WYO program that allowed insurance companies to shovel money out of Treasury following Katrina.

Ignoring the agency’s responsibility for all but inviting $18 billion in debt, some or all attributable to fraud, Fugate went on to say the FEMA needs, “to provide flood insurance because nobody else will do it…” – and, in doing so, left coastal property owners twisting in the wind.

The Times Picayune picks up Five years after Hurricane Katrina

The state’s biggest insurers retreated in the wake of the storm. State Farm, which had 35 percent of the homeowners policies in the state at the end of 2004, now has 28 percent and is not writing new homeowners policies in the New Orleans area.

Allstate, which had 22 percent of the homeowners policies in the state at the end of 2004, has shrunk by one-third, and now has 14 percent of the market. The company will write new business in the New Orleans area, but only if the wind coverage comes from Citizens. Other major insurers such as Louisiana Farm Bureau Mutual Insurance Co. and Travelers also have sought to reduce business…

wind-only policies…from Citizens basically have vanished, even though back in 2006 Citizens predicted that these riskiest type of policies would become 30 percent of its growing book of business.

A meaningful solution to the problem Congress has adding wind coverage to the NFIP was suggested in a recent email message I received – “limit the multiperil option to owner occupied residences”:

Dauphin Island, Alabama has had seven disaster declarations in the past 25 years. It also has the highest repetitive NFIP losses. Those beach houses are almost universally rentals… Homes owned by investors should be made to make money without subsidized flood insurance.

USA Today’s data map of “repetitive loss properties”,  Frequent flooding drains insurance fund, and the accompanying story Post-Katrina, stalwart Miss. retirees rebuild, make the point:

Hurricane Katrina damaged or destroyed more than 94,000 homes in Mississippi‘s three coastal counties — Jackson, Harrison and Hancock — according to a U.S. Department of Housing and Urban Development analysis. Many residents have been unable or unwilling to rebuild.

Joe Floyd, a home builder in Hancock County, said higher insurance costs, increased elevation requirements and the slow economy have conspired to keep people from coming back. It has been devastating for his business, he said.

“There was a lot of work the first year, but the price of insurance is so high that people just can’t afford to build,” he said. “Those that could, built that first year. There is nobody building now.”

Naturally, then, the NFIP is under water:

Austin Perez, environmental policy representative for the National Association of Realtors, said “it’s not true” the NFIP encourages rebuilding in sensitive areas. Instead, he said, it allows residents to live in coastal areas with some degree of confidence they will not be ruined financially.

“If there were no flood insurance, the taxpayers would pick up the bill in the form of disaster relief,” Perez said. “This program actually reduces the risk to taxpayers in the event of the flood.”

What taxpayers need now is a FEMA that will support the reduction of risk from of accompanying wind damage and address WYO company fraud.

2 thoughts on “Katrina’s 3 R’s – Repetitive loss, Repetitive fraud and Repetitive fk-ups!”

  1. OOOOOOOOOOOOOoooowweeeeeeeeeeeee I heard a rumor that part of the premium increase was that the stock market has recently plummeted and for decades it has been the insurance industries’ money maker and because it no longer is that premiums are not going down but upward. Again I’m not a socialist but since the government carries the flood policys I believe it should also offer to carry wind in the hurricane states(in all of La.,MIss.etc)and let the insurance companies cover the other interor states. My reasoning is that the insurance companies definitely conspired to screw us after Katrina with wind damage but were liberal with the governments’water damage awards.I believe there is less chance of wide spread government conspiracy to screw policy holders and the government would give us a better wind policy for less premiums.One hundred nanas’/year for a tree house is BS Mr. “Donkey” Donleon! OOOOOOOOOOOOOOOOOOOOOOwweeeeeeeeeeeeeeeeeeeee

  2. Sometime back in early 2008 a post we did on the NFIP was linked on First Draft, one of the many excellent NOLA area blogs that grace our blogroll here at Slabbed. The author over at First Draft spoke of the complexity of the problems facing NFIP and that commentary was spot on.

    While it is true we have some of the highest land on the entire Gulf of Mexico in Bay St Louis Mississippi you don’t have to travel far along the coast either direction to find marshes and wetlands. In the case of Hancock County Mississippi wetlands and slightly higher areas that served as the floodplain were developed with the tacit blessing of the county government as there was no comprehensive zoning. Flushing sewage into septic tanks in these same areas resulted in the Bay being polluted and the oyster reef being closed. It also had the potential to contaminate the wells. So the county got federal funding to run water and sewer, which in turn fostered more development.

    When Katrina came, with the help of outdated FEMA flood maps there were houses on slabs in such areas. The few that stood after Katrina flooded again with Gustav and Ike. Since the Stafford Act provides for the restoration of damaged infrastructure money was spent following Katrina on water, sewer and streets in the same area. We gave out housing grants, the NFIP paid claims and the wind insurers paid (albeit as little as possible).

    5 years later few can afford to live in what was an affordable housing area but the infrastructure is all brand new. The land should have never been developed because it flooded everytime a tropical storm would hit and sometimes with winter/spring “southeasterly” storms. Instead federal money is poured into the blackhole to no good end.

    Dauphin Island Alabama is the the poster child for absentee owned beachhouses and is the most egregious example of a NFIP money pit. After Ivan FEMA spent big bucks sand dredging fill back onto the island to re-establish the private property lines the storm otherwise buried beneath the waves. One year later Katrina did another number on the place and yet more money was spent. It’s lunacy IMHO.

    Right now the bill is being paid for off the backs of bluecollar folks that don’t have Mike Chaney’s “scenic view on the Gulf”. In fact a large number of those “scenic view” folks live in places like Jackson, Montgomery, Baton Rouge, and Hattiesburg. Part of the reason the claims dumping racket worked for so long for insurers was because it allowed absentee homeowners to either run naked or have minimal wind coverage as the insurer that ran the NFIP made it a defacto multi peril policy.

    Follow the money folks. NFIP rates are the same whether the dwelling is owner occupied or a rental. I fail to see any reason why we should be subsidizing absentee owners in the NFIP as those folks have no stake in the community beyond their investment. We also need to recognize some areas should never be developed and if the locals are dumb enough to fill in wetlands and build houses the only federal money spent should be buying those folks out after disaster befalls them.

    We have met the enemy and he is us.


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