In a highly polarized Congress, it is good to see Florida lawmakers collaborate on a bipartisan response to the broken National Flood Insurance Program.
Republican Rep. Dennis Ross of Lakeland and Democrat Rep. Patrick Murphy of Jupiter are sponsoring legislation to encourage the development of a private insurance market that would offer property owners an alternative to the National Flood Insurance Program.
They have been working on the issue for more than a year. The sensible measure won’t end the fiscal drain of subsidized flood insurance. But it should provide property owners more options in obtaining affordable protection. Rep. David Jolly also is a co-sponsor of the bill.
Federal law mandates that federally regulated or insured lenders must require flood insurance on mortgages on property in high-risk flood areas.
The language does not demand federal flood insurance, but in most cases National Flood Insurance Program policies are required.
The Ross-Murphy measure clarifies that private carriers can provide the flood insurance required by law.
The federal legislation complements a measure, sponsored by Pinellas state lawmakers Sen. Jeff Brandes and Rep. Larry Ahern, enacted this year that would allow homeowners to customize coverage, reducing coverage to the amount of their mortgage or excluding coverage for the contents of the house.
All this should help consumers. As Ross says, “More choices can mean better coverage and cheaper policies for homeowners. … Allowing private insurers to come into the government-dominated flood insurance market creates competition and innovation.”
Although the Ross-Murphy plan, offered in the Senate by Republican Dean Heller of Nevada and Democrat Jon Tester of Montana, will help, it will remain difficult for the private market to assume much of the flood-insurance burden as long as Washington heavily subsidies federal policies.
In 2012, Congress tried to reform the National Flood Insurance Program that was running up a $24 billion-a-year debt with the Biggert-Waters Act, which sought to bring insurance bills up to market rates.
But the measure went too far, too fast, and some homeowners were suddenly faced with insurance bills 10 or 20 times higher than the previous year.
Moreover, some modest properties far from the shore were included in the flood zone. The public was outraged, and Congress backtracked, reducing and delaying increases.
Although that was appropriate, Washington must end the generous subsidies if it wants the private market, instead of taxpayers, to assume the risks.
The private market will ensure the rates reflect the risks of living in hazardous areas, which should discourage risky coastal developments.
As Jimi Grande of the National Association of Mutual Insurance Companies testified to Congress last year, “Private insurance companies can’t borrow billions from the Treasury, and they can’t compete with a government program that charges significantly less than the private sector would in order to support policies.”
As the reaction to the Biggert-Waters Act showed, Congress must take care in abruptly changing the rules and costs for homeowners, but it cannot continue to offer unrealistic subsidies indefinitely.
The Ross-Murphy measure, obviously, isn’t a solution, but it does offer an opening for the private market, which represents progress.