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Improving Our Flood Insurance System

The federal government should do a better job of considering the effects of the cost of disaster repairs for homes in notoriously high-risk areas. In 2023 alone, the National Centers for Environmental Information reports that there were 28 weather and climate disasters in 2023, with a total cost of $92.9 billion and 492 direct and indirect fatalities

This uptick in weather-related damages and the rebuilding costs points to a glaring public policy problem: the government’s failure to reform taxpayer-backed flood insurance programs. Representative Earl Blumenauer (D-OR) recently urged Congress to consider the writing on the wall for no-nonsense insurance changes: “Even though I have tried to sound the alarm, we have precious little to show for it. I was on national TV two weeks before Hurricane Katrina, stretching in very vivid terms what was going to happen to New Orleans when the big one hit.” 

Rep. Blumenauer, who has led efforts to reform federal disaster insurance since 2004, released a report in 2021 From Ruin to Resilience: Protecting Communities and Preventing Disasters that provided a comprehensive analysis of federal disaster relief challenges and opportunities. According to that report: “We can start with the basics: stop allowing new development in risky places, like areas with high flood risk. We must deal with repeat loss properties in a more thoughtful way.” 

Others are also calling for overhauling our insurance system and eliminating the action-reaction cycle that the government has to use to insure disaster prone areas.

The bipartisan Flood Insurance Market Parity and Modernization Act (H.R. 1422) received widespread support when introduced in 2017, passing the House two years in a row. This legislation, sponsored by Reps. Dennis Ross (R-FL) and Kathy Castor (D-FL) along with the Senate companion S. 563 by Sen. Jon Tester (D-MT) and then-Sen. Dean Heller (R-NV), would have allowed private insurance companies to compete directly with the National Flood Insurance Program, reducing the burdens on taxpayers. 

The bill also would have changed the way that insurance companies interact with properties that have been flooded multiple times. These repetitive loss properties make up only 1 percent of the total amount of properties covered, but contribute to 30 percent of insurance claims that are being made. The high cost as well as the high amount of risk leaves taxpayers to pick up the cost of repairing these homes after natural disasters, which contributes to an already high price tag. Consistently bailing out programs to fix these homes will only increase their cost over time, while still not addressing some of the structural issues of our current high-risk systems. 

Other potential reforms include investing in risk mapping for these insurance companies, adjustments to risk based pricing, and allowing greater private innovation into these areas. All of these options avoid the cost sink of an extension into the National Flood Insurance Program while still addressing the infrastructural issues that we see in disaster prone areas. 

Assisting the people who need it most goes deeper than just investing in a community after a disaster happens. By continuously improving our insurance infrastructure programs, we can improve the quality of life for taxpayers and the people who are living in flood prone areas, preemptively assisting them in their mission to find a safe home.