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In Washington on Wednesday, lawmakers are scheduled to hear about flood insurance, which seems like a good idea. Flooding along the Mississippi River in the past few weeks will be one of the costliest winter floods in history. That price tag has some lawmakers wondering if the feds should get out of the flood insurance business altogether.
When buying a house, part of the deal is getting insurance. Rafael Lemaitre, with the Federal Emergency Management Agency, said in some parts of the country, it's more complicated.
“There are certain people who, as a condition of having their federally backed mortgage are required to purchase flood insurance,” he said.
Most opt for a National Flood Insurance Policy. Homeowners buy the policy from a private insurance company, but the federal government subsidizes it and pays out any claims. The insurance company administers the policy.
Carmen Balber, executive director of Consumer Watchdog, said she thinks the federal government would be happy to unload flood insurance to private insurers. But that's easier said than done.
“To be perfectly honest, they’re probably going to have to lower the bar a lot further to get widespread entry into the market by private insurance companies,” she said.
In other words, if the feds want to temp the private insurers to rush in, they’ll have to significantly loosen the rules under which they operate.
As for the homeowners, in the U.S. only about 14 percent of them have a flood insurance policy.
