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Thursday, Oct 30, 2014
Editorials

Don’t retreat from reformingNational Flood Insurance

Published:

Congressional reforms to the National Flood Insurance program will cause hefty rates increases, and affected homeowners are demanding the changes be delayed or eliminated.

Some revisions may be justified to keep costs manageable and soften any blow to the economy.

But Congress should remain committed to an overhaul needed to rescue a federal program that was washing away tax dollars.

The reforms were adopted by Congress last year to address a $20 billion deficit.

The National Flood Insurance Program demonstrated the pitfalls of government’s good intentions. It was aimed at helping homeowners deal with natural disasters but ended up encouraging dangerous and destructive construction in flood-prone areas.

Taxpayers were forced to continually bail out residents living in hazardous areas, though the program was supposed to be funded by premiums collected from property owners.

A few years ago a USA Today investigation found 20,000 homes had collected federal insurance payments that exceeded the value of their homes.

Payoffs came with no flood-prevention requirements. Homeowners were covered even as they rebuilt in risky areas.

Congress’ reforms were aimed at stopping the money drain and bringing some market discipline by having the insurance rates more accurately reflect the risks.

The transition undoubtedly will be difficult, and the government should be willing to make some adjustments.

As The Tampa Tribune’s Josh Boatwright reports, owners of older homes in certain flood zones could see their insurance costs in the coming year increase from about $2,500 to $15,000, which would be unaffordable for many people.

But for most homeowners, Boatwright reports, the increases will be 10 to 20 percent while second homes, commercial properties and homes that have had repeated flood claims will begin to experience 25 percent annual hikes.

The increases are a result of the program curtailing what were essentially federally subsidized insurance rates for older homes built before flood maps accurately reflected the financial risks.

All this is a complex issue that requires balancing flood risks, taxpayer exposure and the financial realities of long-time homeowners who may not have even known they lived in a flood zone.

U.S. Rep. C.W. Bill Young of Pinellas County warned the Federal Emergency Management Agency the changes could “devastate the fragile real estate market” in many beach communities. A House measure would delay the increases for a year.

FEMA Director Craig Fugate should carefully attend the economic consequences and determine whether delay or further concessions are appropriate. But there should be no retreating from a reformed flood program.

It is a financial disaster because the government takes risks that private insurance companies never would contemplate.

There is nothing wrong with Washington trying to soften the blow of these changes.

But if the nation is ever going to put its fiscal house in order, vigorous discipline will be required.

The National Flood Insurance Program should provide a safeguard for catastrophic flood events, not spare homeowners marketplace realities.

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