Rep. Miller: Eliminate the National Flood Insurance Program

Apr 8, 2013 Issues: Great Lakes

Harrison Township, MI – U.S. Representative Candice Miller (MI-10) today called for swift action on her legislation the National Flood Insurance Program (NFIP) Termination Act of 2013 (H.R. 1194) she introduced to eliminate the NFIP by December 31, 2015.  The NFIP currently is a federal program that has a deficit in the tens of billions, is not actuarially sound and just recently had its borrowing authority raised to $30.75 billion.

Currently the Federal Emergency Management Agency (FEMA), which manages the NFIP program, estimates that once the recent settlements are paid for the damage caused by Hurricane Sandy, the NFIP will have accumulated more than $28 billion in debt.  Miller said:

“It is ridiculous that the federal government remains in the flood insurance business.  With no end in sight for the NFIP in racking up new debt, continuing subsidized rates for those who live in flood prone areas, skyrocketing rates for many who live in areas that never flood and 40 years of history showing clearly that the federal government is a very bad insurance company; it is time to take decisive action to wind down the NFIP instead of offering up more bailouts.

“The NFIP was created in the late 1960’s after some concluded that the private marketplace could not provide policies at an affordable level in some areas and the program began writing policies in the early 1970’s with the federal government setting rates based on political considerations instead of actual risk.  The Great Lakes are at historic low water levels, yet our property owners are being forced to pay higher flood insurance premiums than states like Florida or Louisiana, how unfair is that.  How else can one explain the fact that policy holders in places like Florida or Louisiana are paying lower rates than those in Michigan who look out their back doors and see the lowest water levels in many generations and are under almost no risk of flooding?  If any private insurance company set rates in such an arbitrary, capricious and unfair manner they would be immediately shutdown by every state insurance regulator, but the NFIP gets away with these practices because it is a federal government entity.  It is time to shutdown this terrible insurance company.

“My bill would end the NFIP on December 31, 2015, and would allow states to form regional insurance compacts to spread risk, to partner with the private sector to accomplish this goal and continue to allow the FEMA to assist in those efforts where appropriate.  Those who choose to live in floodplains or flood prone areas should be required to purchase flood insurance if they wish to use a federally backed mortgage, but the rates charged must be based on actual risk instead of the current practice of subsidizing rates based on political considerations.  This is vital because over the last several years it has become clear that the NFIP is using those who live in states like Michigan and other Great Lakes states as ATM machines for the rest of the nation, particularly the parts of the country that are subject to hurricanes.  The fact that over the last 20 years Michigan rate payers have received back only $1 for every $7 paid in premiums shows clearly that we are being over charged, and yet NFIP continues to force more Michigan residents into the program and raises rates even further while continuing to subsidize rates in places with the highest risk of flooding.

“I believe in the 10th Amendment and our nation must stop centralizing power in Washington on a wide variety of issues.  If some believe the federal government should provide flood insurance then why not earthquake insurance or fire insurance or car insurance?  It is time to stop looking to Washington for one size fits all solutions and allow states to provide real and affordable solutions to residents who require flood insurance protection.  It is time to remove the federal government from the flood insurance business, end the unfair debt liability being placed upon all taxpayers by this unsound federal program, stop the practice of forcing unjustly high rates on those living in areas under little risk of flooding, stop the politically motivated subsidizing of people who live in highly flood prone areas and restore power to the states.”

Miller’s bill (H.R. 1194) seeks to dismantle the NFIP by December 31, 2015, allowing states enough time to form regional insurance compacts to spread risk, and continue to allow the Federal Emergency Management Agency to assist their efforts by producing high quality flood maps to assist states and the private sector to insure against flood loss.

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