National Flood Insurance Program - we should end it

drypowder

drypowder

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This country really needs to think about the National Flood Insurance Program and whether it does more harm than good in the long run. The benefits are obvious in the aftermath of major floods like Katrina, Sandy or Harvey. But the drawback is it ensures the costs to the taxpayer will continue to grow larger.

NFIP essentially provides 'affordable' flood insurance to people. It's only affordable because it is taxpayer subsidized. This creates moral hazard - i.e., if someone is going to bail you out after you undertake risky behavior, it creates a greater incentive for such behavior than if there was no one to bail you out. In the context of floods, there are lots of coastal areas where there is no private insurance market (even before NFIP, and certainly more after NFIP). There is no private insurance market because the insurance premiums would be so high (even with insurer competition; it's a function of how disastrously expensive flood damage is) that no one would pay. This is a GOOD THING. It means people will think "Hmmm, I'd like to buy a house in this area, but no insurer will provide flood insurance here. I don't have the money to self-insure, so I guess I better move elsewhere." <---- This is how people should think!

Instead, we have taxpayer subsidized flood insurance. So now people think "I like this area, and the flood insurance is pretty cheap. I'm moving in!". And this is how you have huge population buildups in areas it makes no friggin sense to build in. Rebuilding New Orleans was a colossally stupid idea. Because of the moral hazard NFIP creates, we continue to grow these flood prone areas, which simultaneously decreases the land's water absorption/drainage properties and increases property and population, guaranteeing ever larger taxpayer bailouts.
 
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Building on the beach or in a swamp should be live there at your own risk. I'm not far from the coast, 20 some miles inland as the crow flys, 30 by road, but built in a place that hasn't flooded during some pretty major rain events other than road wash outs from creeks. We all stand a risk in the flat lands, some more than others, especially if you bought or built within a mile of a river. Rivers flood, and beaches are automatically a total loss during a major hurricane, areas like that shouldn't be tax payer subsidized. It's pure ridiculous at the money being spent to save rich people's homes and property on barrier islands where the landscape is supposed to naturally change. Waste of money fighting Mother Nature.
 
Silver_Bullet said:
Building on the beach or in a swamp should be live there at your own risk. I'm not far from the coast, 20 some miles inland as the crow flys, 30 by road, but built in a place that hasn't flooded during some pretty major rain events other than road wash outs from creeks. We all stand a risk in the flat lands, some more than others, especially if you bought or built within a mile of a river. Rivers flood, and beaches are automatically a total loss during a major hurricane, areas like that shouldn't be tax payer subsidized. It's pure ridiculous at the money being spent to save rich people's homes and property on barrier islands where the landscape is supposed to naturally change. Waste of money fighting Mother Nature.
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It's not just rich people and beach houses. It's also cities like New Orleans, and Houston, to some extent.

All I hear on the news is "How they are going to rebuild after Harvey?" No one is asking "Should we rebuild?" And because that isn't being asked, we are setting taxpayers up for ever larger catastrophes.

It's cost efficient to build refineries by the water, but they are built much more flood resistant than residential or more typical commercial properties. And the refining companies can self-insure or buy private market insurance. So let them stay there. But stop subsidizing people living in low lying areas by the ocean and nearby rivers.

If one is contemplating taking a risk that no one is willing to insure in a free market, that should be a clue!
 
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I say kill it because...

While living in Houston I met quite a few people who lived in flood prone areas. Not just a 100 year area but where they lived it flooded every 1-5 years. Their reasoning was this: They were single or low income. When the flood would wipe everything out they would just get the federal aid, buy new, get the repairs done on the cheap and pocket the rest.

There were so many companies that would cater to the federal flood requirements. The owners won, the repair companies won, the local vendors won. Prove it you say? No, I don't have the time and you won't have any cooperation. That's the facts.

-R
 
I think that we should do away with this program. I do not agree with subsiding people who choose to build on the coast. Why should we, the public, subsidize their lifestyle choice with stolen tax revenues?

I also questioned the wisdom of rebuilding after Katrina. In fact, I recall the initial assessment was that large portions of the city should be demolished and pushed off into the ocean. It wasn't until the outcry that doing so would be "racist" because the areas affected were predominately Black that serious talk was given to rebuilding those sections of the city.
 
drypowder said:
This country really needs to think about the National Flood Insurance Program and whether it does more harm than good in the long run. The benefits are obvious in the aftermath of major floods like Katrina, Sandy or Harvey. But the drawback is it ensures the costs to the taxpayer will continue to grow larger.

NFIP essentially provides 'affordable' flood insurance to people. It's only affordable because it is taxpayer subsidized. This creates moral hazard - i.e., if someone is going to bail you out after you undertake risky behavior, it creates a greater incentive for such behavior than if there was no one to bail you out. In the context of floods, there are lots of coastal areas where there is no private insurance market (even before NFIP, and certainly more after NFIP). There is no private insurance market because the insurance premiums would be so high (even with insurer competition; it's a function of how disastrously expensive flood damage is) that no one would pay. This is a GOOD THING. It means people will think "Hmmm, I'd like to buy a house in this area, but no insurer will provide flood insurance here. I don't have the money to self-insure, so I guess I better move elsewhere." <---- This is how people should think!

Instead, we have taxpayer subsidized flood insurance. So now people think "I like this area, and the flood insurance is pretty cheap. I'm moving in!". And this is how you have huge population buildups in areas it makes no friggin sense to build in. Rebuilding New Orleans was a colossally stupid idea. Because of the moral hazard NFIP creates, we continue to grow these flood prone areas, which simultaneously decreases the land's water absorption/drainage properties and increases property and population, guaranteeing ever larger taxpayer bailouts.
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The so called "affordable" insurance ain't all that affordable for the middle class working guy. What we are winding up with in NC is more and more expensive water properties owned by a few developers who buy up water front properties because the locals can no longer afford to live there. Or they get wiped out when we have a big storm and have to sell out. Our flood insurance program has turned into a transfer of land from poor and middle income Americans to the big money boys who can afford the cost. So, yeah, if the little guy can't afford the payments anyway, dump it and stop subsidizing overdevelopment in flood zones.
 
and.... it does not pay off anyway. There are still thousands waiting for claims from Sandy to be honored. Many more were settled for pennies on the dollar. It's not like you have a choice if you have a mortgage.
 
I love the beach. I would love to live near the beach. That said, get rid of NFIP, let people pay for their own insurance, and it should be a one-shot deal: your stuff gets demolished, that's it, no rebuilding. Get your pay-out and move on. You can't control Mother Nature, and sooner or later, she will win.
 
Off topic warning----
I am currently reading a semi-sci-fi novel about the sort of near future that is based on the massive flooding along all Earth coastlines. Sci-fi isn't my usual genre, but this one is rather interesting and presents some interesting challenges.

Yankee warning---
If you have lived or worked in the New York City area you will find it particularly interesting. I have learned a lot of historical facts I'd not have known otherwise.

I'd pass the book along but that would probably piss off the Brunswick County Public Library (-;
Title: New York 2140 by Kim Stanley Robinson
 
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