All Wet

A recent study by the National Wildlife Federation, a leading environmental group, documents the high tide of insanity that is the federal flood insurance program.

Higher Ground, available on the Web at www.nwf.org, focuses on "repetitive loss properties"--homes the government keeps rebuilding over and over again through insurance settlements. Using data from the Federal Emergency Management Administration, the study finds that between 1978 and 1995, repetitive loss properties (defined as two losses of over $1,000 each in any 10-year period) represented 2 percent of the homes insured but claimed 40 percent of the payments. Over 5,500 property owners collected more than the total value of their houses. Top honors went to a Texan with a house worth $114,000 who collected $807,000 on 16 claims over 18 years.

Such statistics illustrate the lunacy of the 30-year-old flood insurance program. It undercharges property owners and takes on risks that no sane insurer would accept, which encourages development in flood plains. This, in turn, increases both the political pressure for more government expenditures on flood control and the monetary losses that occur when the inevitable 100-year or 500-year floods overwhelm those defenses. Those losses are then paid for by the insurance program, and the spiral starts all over again.

During the past 25 years, the Army Corps of Engineers has spent $25 billion on flood control projects, but the losses just keep on rolling like a river. Indeed, the insurance program has lost more than $40 billion in the last five years.

But cheer up, things could be worse. And they're getting there: People are now becoming so used to the idea that the federal government will pay for disasters that they are not bothering to buy even the subsidized flood insurance. In most places, less than 30 percent of the properties located in designated flood plains are covered.

The response to such developments? The feds are now working with communities, buying back properties, passing regulations, yada, yada, yada. All to try to keep people from doing what government payments make it profitable for them to do: build in flood zones. Indeed, the feds seem anxious to consider anything except the one solution--eliminating the insurance program--that might actually change the situation.

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