Rep. Miller: The State of Michigan Continues to be an ATM for the National Flood Insurance Program

May 20, 2013

WASHINGTON – U.S. Representative Candice Miller (MI-10) recently sent a letter to the Michigan Governor Rick Snyder requesting that his administration and the Michigan Legislature explore possible options for allowing Michigan to opt out of the National Flood Insurance Program (NFIP).  Miller said:

“The NFIP is a broken and unfair federal program that must be eliminated.  This program continues to spiral into billions of dollars in debt – currently reaching $28 billion and no end in sight.  The NFIP is inflicting financial harm to Michigan residents across the state by forcing many to pay excessive premiums for flood coverage they don’t need to subsidize the artificially low premiums in flood prone states.  For instance, according to the Federal Emergency Management Agency, NFIP policyholders in Michigan paid $315.5 million in premiums and received $60 million in claims over the period from 1978 through 2012, a ratio of over five dollars paid into the program for every one dollar received in benefits.  In the same time period, the state of Louisiana paid in only about one dollar for every four it received in benefits.  That is what happens when rates are set by political considerations instead of actual risk.  In short, the federal government is a bad insurance company and should not be in the business.

“I continue to ask the question – why in the world is the federal government in the flood insurance business?

“In the U.S. House of Representatives, I have introduced the National Flood Insurance Program Termination Act of 2013, my bill which would eliminate the NFIP in its entirety.  It would give states, such as Michigan, the ability to form regional insurance compacts to properly spread risk within a state or region and allow rates to be set based on actual risk which would result in many Michigan residents paying far less than they are forced to pay today.  I am asking Governor Snyder and our state legislature to seriously consider having the state of Michigan opt out of the NFIP and provide a sound alternative to residents who are currently forced into that program.  I believe our state could do this on our own by self insuring or by forming a regional compact with other Great Lakes states or through public-private partnerships.  We must explore additional ways to allow Michigan to opt out of this unfair and actuarially unsound program.”

Letter Rep. Miller sent to Governor Snyder:

May 14, 2013

The Honorable Rick Snyder
Governor
State of Michigan
P.O. Box 30013
Lansing, MI 48909

Dear Governor Snyder:
I am writing to you today regarding the National Flood Insurance Program (NFIP) and how this broken federal program is harming Michigan residents across the state.  As you continue your efforts to reinvent Michigan, I hope that you will explore any possible options for allowing Michigan to opt out of this unfair and actuarially unsound program.

This is a particularly timely issue due to the devastation visited on the East Coast by Hurricane Sandy just last Fall.  Hurricane Sandy was obviously an enormous tragedy with huge consequences for the East Coast, and it is our obligation to help out our fellow American citizens in responding to this disaster.  However, I also believe that it is unfair for the residents of Michigan to continue paying excessive premiums for less coverage while flood prone states pay subsidized premiums under the current NFIP.

The NFIP was already more than $20 billion in debt before Hurricane Sandy made landfall, and this natural disaster has only caused it to become more insolvent.  Congress recently increased the NFIP’s borrowing authority by $9.7 billion to $30.4 billion.

According to FEMA, NFIP policyholders in Michigan paid $315.5 million in premiums and received $60 million in claims over the period from 1978 through 2012. In other words, Michigan policyholders paid over 5 times more dollars in premiums into the NFIP than they collected in claims over this period.  This pales in comparison to states that are flood prone such as Florida, for example.  During that same time period, Florida policyholders paid $15.8 billion in premiums and received $3.7 billion in claims, or 4 times more in premiums than they received in claims. 

I absolutely agree that people who choose to live in floodplains or flood prone areas should be required to purchase flood insurance in order to secure a federally backed mortgage.  This is common sense.  While we do have places in Michigan that flood, I believe that the NFIP is using the state of 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. At a time of record low water levels for the Great Lakes, it is incomprehensible for Michigan residents to pay such high premiums.

Because of these and other concerns, I have introduced the National Flood Insurance Program Termination Act of 2013.  My bill would eliminate the NFIP in its entirety.  It would give states, such as Michigan, the ability to form regional insurance compacts to properly spread risk within a state or region as well as let the private insurance market adapt to these changes.  My bill would also retain the Federal Emergency Management Agency’s assistance in producing high quality flood maps and assisting states and the private sector to insure against flood loss.

I would like to urge you to seriously consider the ability of the state of Michigan to provide a sound alternative to Michigan residents who require flood insurance and explore all options, either at the state level, regional level or through public-private partnerships.  Michigan has the ability to lead the way on this issue and I look forward to working with you to do so.

Thank you for your consideration of this request.  I look forward to continuing to working with you to ensure that Michigan continues to become an even better place to live and work. 


Sincerely,
      
CANDICE MILLER
MEMBER OF CONGRESS

CC: The Honorable Randy Richardville, Michigan Senate Majority Leader
The Honorable Joe Hune, Michigan State Senator
The Honorable Jase Bolger, Michigan Speaker of the House
The Honorable Pete Lund, Michigan State Representative


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