The Economics Of Flood Insurance In America

August 30, 2017 in Daily Bulletin

Government policy had made the impact of Hurricane Harvey worse wrote Michael Grunwald:

  • The American government offers a heavily subsidized flood insurance program.
  • The subsidies inadvertently encourage Americans to build homes in flood prone areas.
  • One home valued at about $100,000 is known to have flooded 16 times in 18 years, and generated claims worth $800,000.
  • In 1998 just 2% of insured properties were estimated to be responsible for 40% of claims.
  • In Houston the program has helped encourage homeowners to spread to former wetlands, helping to explain why it has seen three “500 year floods” in the past three years.
  • Climate change makes the problem worse but isn’t thought to be the primary culprit.
  • An attempt at reform through increased premiums was passed by Congress in 2012, but after opposition from coast and river communities the bill was dropped.

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