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Views of the I-12 bridges over Tangipahoa River in Robert that flooded in the Great Flood of 2016,

The public/private structure of the National Flood Insurance Program is simply upside down. Since the program began in the 1960s, the government has provided primary flood coverage through private carriers at subsidized rates on a standalone basis. The private market has offered the excess coverage (when desired) at market rates. It’s time to reverse these roles of the government and private markets.

Since the government’s flood insurance program is losing money ($30 billion so far), and the private market is making money, maybe the government should incent the private carriers (State Farm, Allstate, Nationwide, etc) to begin including the perils of flood insurance on every policy sold in the country just like wind and snow are covered on all standard policies. The private carriers already benefit by the natural spread of risk on all other perils covered in the policy form, so they have a natural cushion, and thus they could also charge the adequate rate for the additional flood risk.

The good news is that the required flood insurance premium would be lower for everyone because instead of having only five million people who are primarily in the exposed locations buying flood, you’d have closer to 100 million homeowners everywhere now participating. The carriers would only offer a base of $100,000 or $200,000 of coverage, but that guarantees nobody would ever hear the words, “I thought flood was covered by my homeowners policy” again. Moreover, it would eliminate thousands of useless lawsuits, and FEMA wouldn’t be deployed as much.

Then, if a homeowner wanted higher flood limits, the government would provide the excess flood limits at market rates, which would allow it to actually make money to dig the taxpayers out of the $30 billion hole that’s been created under the existing, antiquated, subsidized structure.

The flood program is upside down. Let’s change it now.

Tommy McMahon

Eustis Insurance & Benefits

New Orleans