National Flood Insurance Program (NFIP) Does More Harm than Good

In testimony before the Senate Committee on Small Business and Entrepreneurship earlier this month, the vice chairman of the National Association of Realtors’ (NAR) Insurance Committee called for lower flood insurance rate increases as Congress works to reauthorize the NFIP, which expires in September 2017. Currently, the NFIP uses taxpayer dollars to subsidize insurance premiums and disaster assistance for homeowners and businesses in areas deemed as high-risk for flooding. Lowering flood insurance rates would mean increasing the taxpayer subsidy.

The NAR, along with the National Association of Home Builders (NAHB), praised the Homeowner Flood Insurance Affordability Act of 2014, which delayed reforms to phase out subsidies on insurance premiums so that policyholders would eventually begin paying actuarially sound rates.

Flood insurance rates in high-risk areas are understandably high, but Congress should not force taxpayers to foot the bill. From 1978-2014, the NFIP paid out more than $51 billion in claims at taxpayer expense.

Instead of subsidizing the program, Congress should eliminate it and allow homeowners to buy flood insurance in a robust private market free of government regulation and mandates. Eliminating the program would increase competition, lower costs, and expand choice within the private flood insurance market. Increasing federal spending at the taxpayers’ expense is the wrong way forward.

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