There is a story waiting for you in a Congressional Research Service report (PDF) filed in June. It looks at the issue of repetitive losses by people who purchase federal flood insurance. Keep in mind, this report was pre-Katrina, and the claims from that storm will change the numbers considerably. Still, the flood insurance program clearly has problems. You are about to learn that a tiny number of people who get washed out, time after time, make up a third of the flood claims.
Before you read on, you need to learn a few terms that will help all of this make sense:
- NFIP is the National Flood Insurance Program, run by FEMA. Your homeowner's policy covers wind damage, not water damage. The NFIP covers the water damage from a flood.
- RLP is Repetitive Loss Properties, those properties that get damaged and repaired by NFIP over and over.
- FIRM is a Flood Insurance Rate Map. These maps were drawn up beginning in 1974.
The report (page 19) says:
A major public policy issue before the 109th Congress is the cost to the NFIP of paying for repetitively flooded properties. According to FEMA, a relatively small number of RLPs [repetitive loss properties] account for a disproportionate share of paid flood claims. Insurance market analysts insist that by reducing the number of RLPs, actual flood insurance claims will be reduced, and this will both diminish the upward pressure to raise flood insurance rates and stabilize, in the long run, the financial condition of the NFIP. [...]
In total, there were 4,498,324 flood insurance policies -- so RLPs are 1 percent of the total policies nationwide. Yet, according to FEMA, this 1 percent accounts for an annual average of 30 percent of amounts paid in claims. Since 1978, RLPs have cost the NFIP about $2.7 billion. Appendix D [of the report] shows that although RLPs exist in all 50 states, five states -- Louisiana, Texas, Florida, North Carolina and New Jersey -- accounted for 63 percent of all repetitive loss payments from 1978 through 2004. The top 10 states accounted for 78 percent of all repetitive loss claims; and the top 25 states account for 96 percent of all repetitive loss claims.
So what do you suppose these properties are? Condos? Vacation homes? The big new developments sitting Oceanside?
The report explains:
The majority of existing flood-prone structures are residences (not vacation or income-producing homes) "grandfathered" into the NFIP when the program was created. These properties have been repaired multiple times with subsidized flood insurance claim dollars. FEMA estimates that 90 percent of RLPs were built prior to December 31, 1974, before the preparation of flood insurance rate maps (FIRM) and building codes that adequately reflected the probability of flooding in special flood hazard areas (SFHA).
What Floods?
The report (keep in mind that after Katrina, these facts may be different) says:
Of the two types of floods -- riverine or inland stream flooding and coastal flooding -- riverine floods typically cause the highest economic losses. On the other hand, coastal floods often cause greater loss of life.
What's the Problem? Why do People Keep Rebuilding in Flood Zones?
The report says some lenders and communities do not enforce the mandatory flood insurance laws. People are allowed to build in flood zones and remain uninsured. See page 18 of the report (PDF).
Most of the high-risk properties were built before we had national flood maps. And, once the properties get flooded, the government allows the owners to rebuild, often without elevating the property or fixing the problem. Read these excerpts:
FEMA estimates that 90 percent of RLPs were built prior to December 31, 1974, before the preparation of flood insurance rate maps (FIRM) and building codes that adequately reflected the probability of flooding in special flood hazard areas (SFHA). These older, generally less-safe pre-FIRM buildings were built before flood hazard risks were fully known and not constructed to resist flood waters.
Moreover, most of the owners of RLPs pay subsidized rates for flood insurance.
FEMA has sought over the years to prioritize RLPs and pursue a variety of insurance and mitigation strategies to stem the disproportionate costs to the NFIP associated with these properties.
So What Needs Fixing?
The report is pretty clear about four steps that should be taken right away:
I want to offer a special thanks to Docuticker for unearthing this document.
Read about legislation that has been proposed to raise flood insurance on those properties that have had more than one claim but still have not improved flood management.
Natural Gas Prices
The Wall Street Journal points out:
While many consumers have focused in recent weeks on the high price of gasoline, utilities are grappling with enormous natural-gas bills that threaten to push another form of energy, electricity, to unprecedented price levels.
Even before Hurricane Katrina, the price of natural gas had doubled during the past two years. The storm's destruction has roiled energy markets, sending natural-gas and oil prices to record levels and foreshadowing eventual rate increases for electricity in the Southeast, where utilities must rebuild heavily damaged systems.
Now, as the winter heating season approaches for much of the country, consumers face a double threat. Many will see record costs on their bills for the natural gas that fuels their furnaces, stoves and clothes dryers. Consumers -- and businesses -- also will get hit with higher charges for electricity made by power plants that burn pricey natural gas.
Fire Safety Experts Worry About the Effects of High Heating Costs
The National Fire Protection Association (NFPA) raises an interesting concern about how high heating costs this winter might cause a new fire danger. The NFPA says when costs of heating get high, people start turning to riskier ways of staying warm.
Especially risky, the group says, are fireplaces and space heaters.
Fireplaces and chimneys were involved in 43 percent of all home heating fires and 11 percent of the associated deaths. Fixed and portable space heaters, including wood stoves, were involved in 25 percent of the home heating fires, but 74 percent of the associated deaths. Central heating was involved in 19 percent of home heating fires and 10 percent of the associated deaths.
Farmers Pay the Price of River Backup
The problems in the Port of New Orleans have backed up Mississippi River traffic and, now, farmers miles away will pay the price.
Suburban Chicago's Daily Herald carried an Associated Press story that says:
Even as the river reopens to shipping, the snarled barge traffic caused by Katrina continues to threaten the ability of [farmer Glenn] Mueller and other farmers to get their grain to overseas markets. Farm cooperatives and grain elevators say they have little, if any, storage space for farmers who are just beginning their harvest.
That will likely force farmers to store grain, in hopes of getting a better price later. But Mueller said he will have to sell some now at a cut rate to get rid of it before it rots.
I have seen similar stories out of Kentucky, Arkansas and Indiana where grain prices have dropped.
At the same time, farmers are paying about 50 percent more for diesel fuel than they did at planting. Sixty percent of the fuel costs for corn growers occurs at harvest time, which is right now. The fuel increases really could not have come at a worse time for farmers.
School Systems Pinched by Fuel Prices
Stateline.org says rural school systems whose school buses cover lots of countryside have no idea how they will survive this school budget year. Some are doing what they can to economize:
In one North Dakota school district, cheerleaders will have to hitch a ride on the bus with the football team to away games.
What else are they doing? Are field trips being cancelled?
Are drivers being told to turn off the bus engine instead of idling (and staying warm)?
Are bus routes efficient, or do you have a lot of buses running with only a few kids on them?
Recruiting Displaced High School Athletes
The New York Times pulled back the curtain on the story about how some top New Orleans and Gulf Coast high school athletes landed at choice high schools after Katrina.
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