National Flood Insurance a disaster for Taxpayers

11:58 PM, Sep 16, 2010   |    comments
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Tampa, Florida -- After a Hurricane hits, people try to put their lives and homes back together and one of the first places they turn to is their insurance company and flood insurance pays for much of the damage.

While South Florida Congress member Ileana Ros-Letinen is a strong supporter of the National Flood Insurance Program, she says it is a necessity for homeowners. However, the program that can be a life saver for those hit by a natural disaster, is a disaster in its own right.

Michigan Representative Candice Miller says she can show that property owners whose property rarely floods are being abused by the Nation Flood Insurance Program. Miller points to a congressional budget office study showing about one million flood insurance policies, about 20 percent  of those issued, are being subsidized. Taxpayers are picking up the difference and in some cases paying out more than the home was worth.

That doesn't make taxpayers happy. Ed Tanner says he should not be forced to subsidize bigger and better homes in the area.

FEMA records show almost 20,000 homes and commercial buildings have collected insurance payments in excess of their value. For example, in Alabama a $153-thousand home has received $2.3 million in claims. In Houston a $116,000 home has received $1.6 million. Miller says this shows it is well past the time and the National Flood Insurance program should be scrapped or reformed.

And to add insult to injury, many homeowners are receiving discount on their second homes or rental properties. For example, in pricey Long Boat Key along the Gulf of Mexico where a direct hit from a hurricane could cause $13 Billion in damages, almost 48 percent of the homes are receiving a discount at taxpayer expense because the homes are not a primary residence.

Patty Templeton Jones with Fidelity Insurance, one of the largest flood policy writers in the state, says homes in counties where there is an effort to stop recurring loses also get discounts. However, she adds the program has to change and be reformed. In Florida 299,049 about 14 percent of the 2,137,388 flood policies are discounted. However, this is a bigger problem that discounted polices and that is recurring claims.

Templeton-Jones says she doesn't believe the government should be rebuilding homes that are continually washed away.

But the way the program is set up now, homeowners who live in vulnerable areas can continue to file claim after claim with each storm that damages their property. Pinellas leads our area with $72, million in repetitive claims; followed by Pasco at $32 million; and Hillsborough at 24 $million. Statewide taxpayers foot the bill for $1.3 trillion dollars in repeat claims.

Miller says these people, who keep filing repetitive claims, are essentially using FEMA as an ATM machine.

What's that costing You? Currently the program is running $19 billion in the red with taxpayers picking up the tab.

Tanner doesn't like it. He says if people choose to live in an area that is vulnerable to floods they should be held responsible for paying their fair share.

Meantime, FEMA points out the program was created by Congress. While the agency says it is as important as ever it also agrees the program is in need of meaningful improvements to reduce the overall cost for disaster recovery on taxpayers. But for now tax payers are drowning in a sea of red because of the program.

Mike Deeson

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