Candice Miller for Congress, Michigan

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Reform flood insurance or pull out of it

by Candice Miller on July 7, 2010

By: Port Huron Times Herald
It comes as no surprise to hear complaints that Michigan residents are being ripped off by the National Flood Insurance Program.

In a speech on the House floor, U.S. Rep. Candice Miller, R-Harrison Township, called for reforming the program or scrapping it altogether.
“I rise today to express my very serious concerns about this program and to remind my colleagues that this program is actually a very bad deal for my constituents in Michigan and in many other states in the Great Lakes Basin,” she said.

In effect, the program has become a vehicle for what pundits like to call “income redistribution” — taking money from one group and giving it to another.

In this case, the welfare recipients are property owners — many of them quite wealthy — in hurricane-vulnerable coastal states.
Congress created the National Flood Insurance Program more than 40 years ago for homeowners who live in flood-prone areas considered too risky for private insurers. Today, the program is drowning in $19 billion worth of debt.

The big problem can be summed up in a word: hurricanes.
Storms such as Katrina and Rita, which lashed the Gulf coast in 2005, cause massive damage. Even if premiums were doubled, the insurance pool would be paying out more in claims than it is taking in.
Risks are not evenly distributed. In fact, 1% of homes account for about 40% of all claims.

Predictably, most “repetitive loss properties” — where claims have been filed more than once – are located in coastal states. The big four are Louisiana, Texas, Florida and Mississippi, where repeat customers have collected billions of dollars.

As Miller points out, Michigan residents contribute far more than they collect. They are being asked to subsidize insurance for other regions.
“States that we see flooded year after year … allow people to keep building and rebuilding in a flood plain or states that keep experiencing hurricanes are essentially using (the program) as their own personal ATM machine,” she said.

The future of the National Flood Insurance Program is in doubt. It expired June 1, and Congress thus far has failed to reauthorize it despite the howls of members from Southern coastal states who like the program the way it is.

Reforms are overdue. For starters, payments should be capped to avoid situations such as the $500,000 home that has submitted $800,000 worth of claims in the past few years.

If Congress refuses to get it right, then the governors of Michigan and other Great Lakes states should opt out of the national program and create a regional pool that does play fair.

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