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Since then, Uncle Sam has backed the vast majority of flood insurance policies in the United States.
Lately, thats come to almost $1 billion a year.
Photo: David Ryder (Getty Images)
It would be one thing if it were a very high performing program.
Certainly thats not been the case.
The governments flood insurance program is plagued by low-participation rates and is deep in debt.
There also have been calls for FEMA to sell policies directly to consumers.
People should be able to buy it directly from FEMA.
FEMA and insurance companies say it isnt quite that straightforward.
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Five years later, Congress mandated thathomeowners in high-risk areaswho have a federally backed mortgage buy adequate coverage.
In 1979, President Jimmy Carter assigned FEMA the role of overseeing the NFIP.
Butinsurance uptake remained relatively low.
In 1983, FEMA enlisted private insurance agents in the effort to sell more policies.
The government agreed to reimburse the cost of writing policies and processing claims.
But the number of policies peaked in 2009, at 5.7 million, and has been declining since.
(As of 2022, thefigureis 4.7 million.)
Thats a fraction of the roughly 100 million eligible properties.
Between 2017 and 2022, the NFIP paid brokers$5.82 billion in commission and expense reimbursements.
Reducing that cut by even a percentage point could save millions.
Three years later, Congress directed FEMA to reevaluate its compensation formula.
The difference is presumably profit, which could amount to many millions of dollars.
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Then came the rain.
What is known is that in fiscal year 2023, FEMA agreed topay WYOs 29.7 percent of premiums.
That allows for significantly lower overhead, he said.
Still, he sees room for improvement.
I always think we should pay attention to how dollars are spent.
That would have saved the NFIP hundreds of millions of dollars last year alone.
High administrative costs are an unnecessary burden to current policyholders and a barrier to those who want to enter.
So far, little has happened with the bill.
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That, they say, could cut costs while almost certainly improving access and transparency.
Every intermediary adds one more step in the chain of telephone, said Moore.
If more people bought directly from FEMA, there are some tangible benefits to the flood insurance programs.
FEMA does run a program called NFIP Direct, which allows policyholders tomake payments and file claims.
This is an example of where the government is more efficient than the private market, the aide said.
Still, NFIP Direct only comprises about 1 in 10 policies.
Agents generally find it easier or are required to work with private insurers they already have relationships with.
Doing so also can bring more in commissions.
The WYOs are not restricted in how much they give to their agents, Rossi said.
There are agencies that give 20 percent or more.
The number of Write Your Owns has already been dropping, she noted.
Carriers dont make a ton of money on the flood program.
I guess its hard for me to imagine the NFIP operating like a well-run insurance company, she said.
I worry that the federal government would be biting off more than it can chew.
The hope is that fixing those issues will lead more people to sign up.
The alternative would require FEMA to figure out how to have in-house agents registered in every state.
My sense is that that would not be as effective as the co-system that already exists, he said.
If the cost of the insurance has gone down, he said, the consumers should benefit.
This article originally appeared inGristathttps://grist.org/buildings/the-billion-dollar-industry-between-you-and-femas-flood-insurance/.
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More homeowners than ever need flood insurance.
Fewer than ever can afford it.
