Why federal flood insurance is $24BB in debt

[DJofSD]

http://necir.org/2014/03/09/oceans-o...u-s-taxpayers/

This just proves when the federal government gets involved, common sense goes out the window.

The triumph of hope and the corruption due to OPM.

[Robert Goren]

Originally Posted by DJofSD

http://necir.org/2014/03/09/oceans-o...u-s-taxpayers/

This just proves when the federal government gets involved, common sense goes out the window.

The triumph of hope and the corruption due to OPM.

You are probably right, but remember the reason the feds got into it was that private insurance companies stopped writing because one huge event could wipe out the company.

[DJofSD]

Originally Posted by Robert Goren

You are probably right, but remember the reason the feds got into it was that private insurance companies stopped writing because one huge event could wipe out the company.

The private insurance market acted in a prudent manner.

At what point does the federal government act accordingly? Why should the tax payer have to foot the bill time after time after time to make whole some one that persists on rebuilding when it is painfully obvious it is not a good place to build a house and live?

[Robert Goren]

Originally Posted by DJofSD

The private insurance market acted in a prudent manner.

At what point does the federal government act accordingly? Why should the tax payer have to foot the bill time after time after time to make whole some one that persists on rebuilding when it is painfully obvious it is not a good place to build a house and live?

In the real world, not the dream world of conservatives, people are going build houses and businesses in scenic risky locales. And when tragedy strikes, the government will act. So why not get some of they money back in premiums. And premiums should reflect the cost, I agree.
The private insurance did not abandon the market because it was unprofitable. They left because risk of a worse case scenario. Something they are in business to cover for other things. That is not an issue for the government. Insurance companies have no problem writing policies for other risky events like tornados in Oklahoma and Nebraska because while they can take a pretty good hit against their assets from time to time, the tornado events are not big enough to wipe them out. It is the size of the risk that is important to them. It is like a gambler managing his bankroll.

[ArlJim78]

government is a distortion and always results in higher costs, unintended consequences, moral hazards, wasteful spending, etc.

[Clocker]

Originally Posted by Robert Goren

In the real world, not the dream world of conservatives, people are going build houses and businesses in scenic risky locales.

Why is it living in a dream world to say that those people should bear the risks and consequences of their actions? If you are a bad driver, your auto insurance premiums reflect that. If you are a really bad driver, you lose your insurance. You pay the consequences of your actions.

Why should house insurance be any different? Why should I bear some of the risk of someone else doing something stupid? You have a right to build a house on your property. You don't have a right to have someone else help pay for it.

[riskman]

Exactly. There is the safety risk to homeowners and financial risk to all taxpayers who subsidize for the Flood Insurance Program.You can not expect the private market to offer insurance on an expected event on these coastal properties.
If banks stopped offering financing, it would help stop development of these properties.

Something has to give here. The Feds in their wisdom might put a surcharge on every Homeowners policy sold in the U.S. to fund this disaster.

The coastal states might have to come up with legislation controlling development and rebuilding along the affected coastal areas.

[Clocker]

Originally Posted by ArlJim78

government is a distortion and always results in higher costs, unintended consequences, moral hazards, wasteful spending, etc.

The history of the federal government's failures in the flood insurance sector should have been a red flag to all, especially those in the government, of what would happen if they got into the health insurance sector.

[Robert Goren]

Originally Posted by ArlJim78

government is a distortion and always results in higher costs, unintended consequences, moral hazards, wasteful spending, etc.

that is also true, but least this case, the government went there because private industry couldn't. Not that private insurance companies wouldn't if they could get big enough. Give an insurance company the assets of the Federal government and they would be offering flood insurance.

[Clocker]

Originally Posted by Robert Goren

Give an insurance company the assets of the Federal government and they would be offering flood insurance.

Why would they want to do that if they couldn't make money on it? If they had the money, why would they give it away to people that do stupid things?

[DJofSD]

Originally Posted by Robert Goren

In the real world, not the dream world of conservatives, people are going build houses and businesses in scenic risky locales. And when tragedy strikes, the government will act. So why not get some of they money back in premiums. And premiums should reflect the cost, I agree.
The private insurance did not abandon the market because it was unprofitable. They left because risk of a worse case scenario. Something they are in business to cover for other things. That is not an issue for the government. Insurance companies have no problem writing policies for other risky events like tornados in Oklahoma and Nebraska because while they can take a pretty good hit against their assets from time to time, the tornado events are not big enough to wipe them out. It is the size of the risk that is important to them. It is like a gambler managing his bankroll.

First of all, you can drop the BS like 'not the dream world of conservatives.'

The only tragedy is not learning the lesson after the first or second time nature wipes you out. I guess having flood maps and zones is just to keep federal employees busy.

There are acts of nature and then there is just foolishness. I'm sure the private insurance companies and the re-insurance industry had concluded there was a reasonable chance they could be financially wiped out. But when it comes to the government that is not a consideration when it comes to floods. Why not?

[Clocker]

Originally Posted by DJofSD

But when it comes to the government that is not a consideration when it comes to floods. Why not?

Because in the federal government there are no consequences for failure. Programs don't get canceled because they don't work. People don't get fired for incompetence and bad decisions. Politicians don't get thrown out of office for waste and corruption.

P.S. This whole thread so far has been off target because we have been talking about federal flood insurance. Insurance is a hedge against risk. As with ObamaCare, when risk is taken out of the equation, it is no longer insurance. It is an entitlement program. Only in this case it is redistribution of wealth to the wealthy. Perhaps if the government called it what it is, it would be easier to kill.

This is not insurance. It is subsidized housing for the well to do. Period.

[ArlJim78]

exactly right, it's a housing subsidy, not insurance.

[Robert Goren]

Originally Posted by Clocker

Why is it living in a dream world to say that those people should bear the risks and consequences of their actions? If you are a bad driver, your auto insurance premiums reflect that. If you are a really bad driver, you lose your insurance. You pay the consequences of your actions.

Why should house insurance be any different? Why should I bear some of the risk of someone else doing something stupid? You have a right to build a house on your property. You don't have a right to have someone else help pay for it.

They should be able to get insurance, but you are right that the premiums should reflect the cost of providing. They are not being denied insurance by private companies from the risk of damage to their property. They being denied insurance because of the risk of too many claims coming at the same time. For private company to offer flood insurance would roughly equivalent to offer only tornado insurance and only in Oklahoma City. They aren't going to that because they can't spread risk around, not because they could not make money doing it. Did you bet every penny you had on Rachel Alexandra to show in the 2009 Woodward? Why not. You would cash over 99% of the time and earn well over an average of 4% on your money. It is putting all their eggs in baskets that insurance companies won't do. That is not an issue for the feds. I like you wish they would get their rates up to at least a break even point.

[Clocker]

Originally Posted by Robert Goren

They should be able to get insurance

Why?

If you drive stupidly, you can't get insurance. Why should you be able to get insurance if you build stupidly?