A Slabbed right of spring: NFIP re-authorization and early Hurricane season predictions.

Folks early indications are with the GOP in charge of the House FEMA’s name will be changed to FEMA, Inc. with the NFIP expected to get a similar name change.

Regarding the proposed actuarially sound rates mentioned in Maria Recio’s article on the topic, I wonder if those rates include the wind damage amounts private insurers dumped on the program after every Hurricane?  I suspect it does.

I think everyone that buys flood insurance should get ready to grab yer ankles because I’m perceiving another taxpayer-funded giveaway to unregulated global insurance companies.

In other news the early Hurricane Season predictions are out (h/t Editilla) and despite the fact they are very unreliable predictors of where storms will strike (or not) look for the media to gin a cheap story from Dr Gray’s modeling sourcing insurance shill Robert Hartwig from the Insurance disInformation Institute who will dutifully poor mouth the situation and then using logic Captain Queeg would certainly appreciate explain why premiums for non-existent coverage will need to be increased in advance of Hurricanes that do not strike.

And the beat goes on…..

sop

3 thoughts on “A Slabbed right of spring: NFIP re-authorization and early Hurricane season predictions.”

  1. After reading several of your blogs and comment responses, I can see you have great animosity to the insurance companies and have outright accused the of defrauding the NFIP. Forgetting about changes to reports & contractual obligations… Did you ever consider that the insurance companies were right & water, not wind destroyed most of the structures. I’ve read your own account of how you survived, & it seems your house was in pretty good shape, except for a porch roof, by the time the flood waters came.

    1. I have great animosity as a taxpayer to being fleeced by big business that have no clue about how to manage risk and stick the taxpayers with their mistakes. (See TARP, AIG, The Hartford etc) I also will admit that I hated seeing insurance companies that advertise on the basis of trust fuck over their own customers.

      I never said wind caused all the damage and in fact I’ve never opined that wind caused the majority of the damage but there are plenty of instances of clear cut wind damage that got dumped on the NFIP and it wasn’t chump change either. Insurers OTOH immediately labeled Katrina a “water storm” and summarily denied thousands of claims without benefit of adjustment.

      Further I was asked by lawyers representing 2 of my neighbors to sign statements that wind destroyed their houses in total before it flooded. I refused because although I witnessed lots of wind damage hours before the flooding arrived no house in my immediately vicinity was completely blown away either. And if you’ve read my story of survival you must have missed the references to clear cut wind damage (trees down in my driveway one of which that inflicted significant damage to my carport for example).

      The reason this country is in debt up to its eyeballs is all the rats that are piled on top the US Treasury. We need to stop the handouts and giveaways and that especially includes big business.

      We clear now?

      sop

  2. There are plenty of problems with NFIP that are the direct effects of the fact that Congress and Administrations from both parties let the insurance industry run the program and dictate its design.

    First of all, insurance companies are not insurers when they handle NFIP policies and claims, since they are not taking any of the risk. They are simply federal contractors and have all the fiduciary responsibility to taxpayers of any other contractor administering a government program.

    When a Write Your Own insurer sells a flood policy, the company keeps 30% of the premiums right off the top. This is to pay the agent commission and cover the company’s administrative costs, but both GAO and CBO have determined that this is a windfall to the insurers. They don’t have much administrative cost with NFIP policies. The 30% is based on what companies spend administratively on their own policies, but they don’t do any marketing, underwriting, risk analysis, or any real insurance administration on flood policies. They just add them on to their homeowners policies if the property is required to have flood insurance. GAO estimated that 24% would be plenty to cover their actual costs on floor policies.

    Congressman Taylor submitted an amendment to last year’s NFIP reauthorization/reform bill to cut the insurer’s subsidy from 30% to 29%, but the Rules Committee did not make it in order to be offered on the House floor. I believe it was a bipartisan agreement within the Rules Committee to protect Members of Congress from having to vote on the record for or against a windfall subsidy for insurance companies.

    When they adjust claims for NFIP, they get another windfall that covers their adjustment costs with more administrative subsidies on top. That was especially a windfall after Katrina because they were paid a percentage of the claims payments but there was not much work or expense involved in driving around handing out flood checks for policy limits with no investigation or detailed adjustment.

    We have the worst possible system for insuring hurricanes. There is really only one reason that coastal property owners cannot buy hurricane insurance that covers hurricane damage without dividing the wind damage from the flood damage, and that is because it is in the insurance industry’s interests to keep them separate, and the insurance industry’s interests are more important to Congress than the consumers’ interests and the taxpayers’ interests combined.

    Notice that in Japan, no one is being required to prove what damage was caused by the earthquake before the tsunami, because that would be a stupid way to insure earthquakes and the tsunamis they cause.

    Finally, these Members of Congress on the committee with jurisdiction over NFIP are amazingly ignorant of what caused the NFIP debt. Before Katrina, we had never had a single event that produced more than $2 billion in flood claims, so there was no way the program was going to have a $15 billion or $18 billion surplus sitting there just in case we had catastrophic levee failures that caused a whole city to flood. Even with a 30-foot storm surge, the Mississippi Coast NFIP claims were “only” $2.6 billion, more than any previous event, but still manageable over time with slight reforms to the program. Throw in the legitimate flooding from storm surge Louisiana and Katrina still would have been only about a $5 billion NFIP event. It was the catastrophic failure of the levees and floodwalls that tripled the NFIP losses. The flood maps showed levees. The premiums and the building requirements were based on levees. The biggest problem for NFIP from Katrina is that a lot of the flooding could have been prevented. This is not a problem that can be solved simply by raising everyone’s premiums, but raising everyone’s premiums would be a good way to increase the windfall subsidies to insurance companies since they get to keep 30% of it. If you look at the “reforms” in the bill that was unanimously passed by the committee, they all serve the interests of the insurance industry.

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