Tuesday, July 20, 2010

Ron Paul's Statement on the Flood Insurance Reform Priorities Act

Statement of Congressman Ron Paul
House of Representatives

H.R.5114, the Flood Insurance Reform Priorities Act of 2010


July 15, 2010

Ron PaulMr. Chair, the Flood Insurance Reform Priorities Act makes a number of changes to the National Flood Insurance Program. Some of these changes are in the interests of taxpayers, such as the new restrictions on subsidies for second houses and vacation homes, while others, particularly the coverage limits, are in the interest of those who own property in flood plains. However, taken in its entirety this bill is not really in the interest of taxpayers or property owners because it creates new federal programs that appear to serve no useful purpose and it continues to allow the Federal Emergency Management Agency (FEMA) to impose unnecessary costs on local communities.

At a time when the flood insurance program is running a deficit of 2 billion dollars this legislation wastes millions of taxpayer dollars on ``outreach'' and "education" programs designed to make sure people living in flood prone areas are aware of the need for flood insurance. Madame Speaker, as a homeowner in a flood plain, I can assure you that property ownership these areas are very aware of the need for flood insurance and do not need any outreach or reminders of the need for flood insurance.

Many critics of flood insurance have pointed out that federally-subsidized insurance encourages people to develop land in areas where under a free market system flood insurance would be prohibitively expensive. This is a valid point; however, it is also true that the flood insurance program often imposes flood insurance mandates on property owners in areas where there is little actual risk of flooding. Much of the controversy over the redrawing of the flood plain maps revolves around concerns that FEMA may force local communities to spend millions of dollars refurbishing levees and dams even though these structures were constructed specifically to protect against the worst conceivable storms.

In some cases, FEMA is even demanding that communities spend money to alter levies that were constructed after consultation with the Corp of Engineers! While I am pleased the bill at least provides a phase-in of the flood insurance mandate for property owners living in the newly-mapped flood plains, I am concerned that it does not do enough to ensure communities and individuals are not forced to incur needless expenses simply to satisfy FEMA bureaucrats. At the least, Congress should not give FEMA the ability to impose new flood maps without adequate oversight. Yet, under this bill, it would be five years before Congress seriously re-examines the flood program.

The basic problem with the flood insurance program is that it assumes government officials are capable of knowing who should and who should not be required to purchase flood insurance, and also determine the premiums for every individual living in a flood-prone area. However, there is no way that government bureaucrats can determine correct amounts of coverage and premium prices for millions of individual homeowners.

If flood insurance were allowed to be provided by the market, private insurance could do an accurate job of pricing risk so that those who wished to live in flood-prone areas could do so as long as they were willing to pay for the risk. Under this market system, property owners and insurance companies would have incentives that are lacking when the program is subsidized by the government; i.e., incentives to adopt innovative ways to mitigate the damage from floods.

My district has experienced numerous storms and floods, including Hurricane Ike in 2008. After each incident, my office inevitably receives complaints from my constituents regarding FEMA's failure to provide them with timely assistance and compensation. My constituents' dissatisfaction with FEMA, along with the shameful way extension of the flood insurance program was held hostage last month in order to blackmail representatives into supporting adding billions more to the national debt, has strengthened my conviction that private markets, local communities, and states can more efficiently and humanely deal with the demand for flood insurance than the federal government.

The Flood Insurance Reform Priorities Act does take some steps toward fixing some of the problems with the flood insurance system, but it also needlessly spends taxpayer money and does not adequately address concerns that FEMA may impose unnecessary costs on local communities--communities which do have plenty of incentive to make sure they are adequately prepared for a flood. Therefore, I must oppose this bill.

3 comments:

Wheatfield United said...

Your State of Michigan pays some of the highest nfip flood policy’s rates in the country and receives less coverage.
Community Average Policy Average Ins Cover
BLOOMFIELD HILLS, CITY $3,257.29 $440,128.57
GROSSE POINTE SHORES, V $2,838.20 $460,000.00
BENTON HARBOR, CITY OF $2,659.80 $335,800.00
L'ANSE, VILLAGE OF $2,541.00 $215,000.00
JACKSON, CITY OF $2,511.93 $375,510.34
MIDDLEVILLE, VILLAGE OF $2,396.67 $235,666.67
WHITEFORD, TOWNSHIP OF $2,356.88 $236,458.82
ROCHESTER, CITY OF $2,290.71 $371,585.71
LESLIE, CITY OF $2,019.33 $218,533.33
STEVENSVILLE, VILLAGE O $2,003.00 $230,000.00
MEMPHIS, CITY OF $1,890.00 $200,000.00
BARAGA, VILLAGE OF $1,816.70 $217,270.00

Compare Michigan policy cost and coverage to Washington DC, Maryland and Virginia.
Community State Average Policy Average Ins Cover
TOWN OF PERRYVILLE MD $186.68 $172,442.51
TOWN OF OCEAN CITY MD $289.46 $159,344.50
TOWN OF POOLESVILLE MD $295.67 $200,666.67
TOWN OF PORT DEPOSIT MD $302.85 $139,752.91
CITY OF TAKOMA PARK MD $303.13 $228,937.50
ARLINGTON COUNTY VA $306.57 $183,466.58
TOWN OF QUEEN ANNE MD $332.50 $262,500.00
TOWN OF WILLARDS MD $348.00 $350,000.00
TOWN OF WOODSBORO MD $388.00 $350,000.00
CITY OF WESTMINSTER MD $412.38 $236,287.50
TOWN OF SECRETARY MD $414.36 $126,863.64
DISTRICT OF COLUMBIA DC $427.08 $167,836.21

Michigan is not being treated fairly; the above data speaks for itself.

Mortgages are being sold every day, a home owner has no control in this, your mortgage could be sold tomorrow to a lender that requires flood insurance, even if you have a LOMA proving your structure is not in the base flood elevation (BFE). Even if you disagree, the lender will do a forced escrow account for flood insurance. Under the present rules Michigan residents with a letter of map amendment (LOMA), are of no piratical use, the lenders have the final say is flood insurance is required.

We ask for your support and help our area and your home state of Michigan.
Change HR 5114 “Flood Insurance Reform Priorities Act of 2010”
• The LOMA rules should be changed to be fair
• Policy rates should be based on the recorded 33 years of flood loss claims data that Fema already has in the system.

Don’t wait until the people of Michigan receive a letter from their lender demanding flood insurance, it will be too late by then.

Wheatfield United said...

Michigan pays some of the highest nfip flood policy’s rates in the country and receives less coverage.
Community Average Policy Average Ins Cover
BLOOMFIELD HILLS, CITY $3,257.29 $440,128.57
GROSSE POINTE SHORES, V $2,838.20 $460,000.00
BENTON HARBOR, CITY OF $2,659.80 $335,800.00
L'ANSE, VILLAGE OF $2,541.00 $215,000.00
JACKSON, CITY OF $2,511.93 $375,510.34
MIDDLEVILLE, VILLAGE OF $2,396.67 $235,666.67
WHITEFORD, TOWNSHIP OF $2,356.88 $236,458.82
ROCHESTER, CITY OF $2,290.71 $371,585.71
LESLIE, CITY OF $2,019.33 $218,533.33
STEVENSVILLE, VILLAGE O $2,003.00 $230,000.00
MEMPHIS, CITY OF $1,890.00 $200,000.00
BARAGA, VILLAGE OF $1,816.70 $217,270.00

Compare Michigan policy cost and coverage to Washington DC, Maryland and Virginia.
Community State Average Policy Average Ins Cover
TOWN OF PERRYVILLE MD $186.68 $172,442.51
TOWN OF OCEAN CITY MD $289.46 $159,344.50
TOWN OF POOLESVILLE MD $295.67 $200,666.67
TOWN OF PORT DEPOSIT MD $302.85 $139,752.91
CITY OF TAKOMA PARK MD $303.13 $228,937.50
ARLINGTON COUNTY VA $306.57 $183,466.58
TOWN OF QUEEN ANNE MD $332.50 $262,500.00
TOWN OF WILLARDS MD $348.00 $350,000.00
TOWN OF WOODSBORO MD $388.00 $350,000.00
CITY OF WESTMINSTER MD $412.38 $236,287.50
TOWN OF SECRETARY MD $414.36 $126,863.64
DISTRICT OF COLUMBIA DC $427.08 $167,836.21

Michigan is not being treated fairly; the above data speaks for itself.

Mortgages are being sold every day, a home owner has no control in this, your mortgage could be sold tomorrow to a lender that requires flood insurance, even if you have a LOMA proving your structure is not in the base flood elevation (BFE). Even if you disagree, the lender will do a forced escrow account for flood insurance. Under the present rules Michigan residents with a letter of map amendment (LOMA), are of no piratical use, the lenders have the final say is flood insurance is required.

We ask for your support and help our area and your home state of Michigan.
Change HR 5114 “Flood Insurance Reform Priorities Act of 2010”
• The LOMA rules should be changed to be fair
• Policy rates should be based on the recorded 33 years of flood loss claims data that Fema already has in the system.

Don’t wait until the people of Michigan receive a letter from their lender demanding flood insurance, it will be too late by then.

Animal said...

Great blog!
An interesting additional read to flood insurance here:
Do I Need Flood Insurance?