Having lived for many years in the “flood-free” city of Johnstown, Penn., I understand the importance of having a sound flood insurance program. In 1977, massive rainfall fell in the Johnstown area (nearly 12 inches in 10 hours), resulting in 85 flood-related deaths and untold property damage. This occurred after the government installed a flood control system following the St. Patrick's Day flood of 1936 that was supposed to protect the city from future floods.

As insurance and governmental officials debate the future of the National Flood Insurance Program, anyone who has seen the destruction that floods can bring have to believe in the need for and value of a sound flood insurance program. And this year will be no different. Flood insurance will enable many policyholders to rebuild their properties and get on with their lives.

Yes, there is a lot wrong with the NFIP system. Just read some of the coverage of the committee hearings on the Flood Insurance Reform Act of 2011. The NFIP is subsidized by the taxpayers and not actuarially sound; it suffers from adverse risk selection; and it is subject to statutory limits on rate increases. And people always seem to return to the very site from which flooding previously drove them.

Why is that?

There are some, I'm sure, who chose a picturesque spot on the coast line and don't want to give up the view. But, quite frankly, many people have no choice. They have lived in the flood-prone town or along the river their entire lives. Perhaps now they cannot sell their homes at least partially because of the flood risk, and can't afford to move elsewhere. Where can they go?

Many people who reside in flood-prone areas will not be able to afford flood insurance if the rates are increased dramatically. Despite calls for privatization, I know that no insurance company can or will ever consider writing such adverse risk business without a subsidy. Hopefully those who are controlling the fate of the Reform Act will keep the need for such a program firmly in mind as they work to shore up its financial stability.

Should we continue the program? I think we should. What do you think?

This blog post is meant to provide insights into insurance coverage issues in general, and does not necessarily account for the differences in law and practice in different venues. As such, the opinions expressed within should not be construed as legal advice for the unique circumstances of any particular claim or suit.

Special Reports /

The Need for a Stable Flood Insurance Program

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