Americans now thinking twice about flood insurance
Even though most Americans do not think about flood insurance every day, in the aftermath of Hurricane Florence in the Carolinas, many are now realizing that it affects their taxes, and now, some people are rethinking the issue … and believe that America needs flood insurance reform.
R. Street Institute Director of Finance, Insurance and Trade Policy R.J. Lehmann is a firm believer in reforming flood insurance in the United States – and he has a brighter vision for its future.
“I’m definitely in favor of reform,” Lehmann expressed. “What reform looks like – different people have different ideas – but there are changes that need to be made.”
The insurance expert went on to elaborate on his position over the debated issue.
“The first and most obvious reason is the Flood Insurance Program – which is the primary source of flood coverage in the United States, [and] is offered through the federal government,” Lehmann pointed out. “It’s a 50-year-old program. It has – since 2004 – borrowed about $40 billion from American taxpayers.”
According to Lehmann, the program has only been able to pay back about $3 billion of that total – just 7.5 percent of what it has owed to the American public.
“Last year, we forgave about $16 billion, but it’s still about $20.5 billion in debt to the American taxpayers – to the U.S. Treasury – and that’s before we start counting the claims that are going to come out of [Hurricane] Florence,” he explained. “So, it is not a sustainable program.”
Lehmann then articulated on what kind of reform he wants to see in the years to come.
“Over the long term, we definitely need to move to risk-based rates,” the finance guru asserted. “Some of the things that we think need to be done in the immediate future are to deal with repetitive loss properties. [For example,] about 2 percent of properties have suffered three or more major losses – and they account for between a quarter and a third of all the claims – so we need to ensure that those properties, in the very least, are paying what they should.”
If it is absolutely necessary, Lehmann is open to the idea of investing money into helping flood victims mitigate the risk by raising their homes – or in some extreme cases, even buying them out.
“We need to update the maps, [because] they are badly out of date” Lehmann continued. “There was an estimate earlier this year that there are actually about 40 million people in the United States that are exposed to flood risk. That’s three times as many as the current maps show, so there are a lot of people who really should have flood insurance that don’t even know it.”
He added that the most important thing in the immediate future is encouraging and allowing Americans to get private insurance.
“There is a small – but growing – private insurance market,” Lehmann pointed out. “There are some bureaucratic things that need to be worked out to allow that to continue to grow, take that risk off of the taxpayers, get the private insurance industry interested in writing flood insurance, and using the full marketing weight of talking geckos and ducks and so forth to get people interested in getting coverage when they’re exposed,” he concluded.
All of these ideas would naturally need to go through Congress, and currently, Lehmann sees the U.S. Senate as being the biggest obstacle to them being implemented any time soon.