Our view: A vital step against losses
Insurance Commissioner Jim Donelon calls flood insurance the best buy you’ll ever get in the insurance market.
With the coming of a new hurricane season he is again urging homeowners to buy the protection that isn’t included in traditional property policies.
“Not everybody is aware of that,” Donelon told the Press Club of Baton Rouge in June, and called upon Congress to renew the National Flood Insurance Program.
No sooner asked than done, unusually with the Congress.
The program had been limping along with temporary reauthorizations. Louisiana’s delegation in Congress, with particular leadership from U.S. Sen. David Vitter, R-La., pushed for a five-year renewal.
The extension was approved when the House and Senate agreed to wrap the flood insurance extension into the new highway bill, for which members of Congress had a firm deadline: Money would run out for thousands of highway projects around the nation were the bill not approved.
While the extension is good news, it was achieved under rules that prevented amendments to the program, including those sought by U.S. Sen. Mary Landrieu, D-La., and other members of the Senate.
“There is no question how important this program is to families in Louisiana and across the nation, and this legislation includes many quality provisions,” Landrieu said. “But I still have serious reservations about increasing insurance rates for millions of Americans without doing anything meaningful to address the issue of affordability for economically distressed households.”
Those amendments will have to wait for a later day.
Why is flood insurance an issue? As Donelon pointed out at the Press Club, only about a dozen coastal states are beneficiaries of the subsidized insurance rates.
That means 38 states are “donor states” to the fund, and many conservatives have pushed back against the federal subsidy.
Any reduction of the higher premiums called for in the extension bill would have likely prompted objections from fiscal conservatives in the House, some of whom have harshly criticized federal aid to Louisiana since the 2005 storms. Unhappily, the scope of damages from the failure of the levees in the New Orleans area has made Louisiana something of a target in the House.
With so many significant advantages for Louisiana in the final highway bill, Landrieu and others in the delegation backed the final version, even sans amendments.
We suggest that even with premium increases, the development made possible by federal flood insurance is nevertheless economically important, and flood insurance is a viable program.
The concerns about cost, as Donelon said, are not justifiable: In almost 50 years of operation the flood insurance program racked up $18 billion in net losses — and $14 billion of that was accounted for in 2005, when hurricanes Katrina and Rita devastated the Gulf Coast and flooded New Orleans.
That’s not such a bad track record.
The protection of Gulf Coast property from flooding is essential if growth and development is to occur. Vitter stressed the need to support troubled housing markets, so that home purchases aren’t held up by a lack of flood insurance.
With all this said and done, it’s still necessary that individuals take out the insurance.
As Donelon said, that is not only a good deal in terms of insurance costs, but one of the basics of hurricane-season preparations.