Like the monster in a third-rate horror movie that seems to be destroyed but comes back again and again, some bad ideas in Washington keep popping up. Adding wind insurance coverage to the National Flood Insurance Program (NFIP), a program that already needs to be bailed out every few years, is one of those irresponsible policy mistakes that legislators continue to push well after it should have been declared dead and buried. Its latest incarnation, H.R. 1264, the Multiple Peril Insurance Act, introduced by Representative Gene Taylor (D–MS), contains all of the mistakes of earlier versions.
Expanding the NFIP in any way is fiscally irresponsible. Some believe if coverage against wind-caused damage is provided at unsubsidized rates, the revenue brought in would cover the real cost of providing the insurance. But a study by Towers Perrin reveals that the proposed wind insurance program would actually run regular operational deficits. Even if Congress forgives the amount that the NFIP already owes, increasing its costs by running additional deficits is a step in the wrong direction.
Affordable wind insurance is readily available through many private sector companies. There is no need to replace these providers with a public-sector program that is already in trouble and has no expertise in administering a wind insurance program. As the experience of states such as Florida has shown, once politics are involved, it becomes very difficult to set premiums in a way that accurately reflects the costs of potential losses. Instead, politicians tend to influence the program to set unrealistically lower premiums to keep their constituents happy and worry about the potential liability only much later.
Those facts are just as true now as they were two years ago. The NFIP can just barely manage to provide the flood insurance coverage that has been its mandate for the last 30 years, and there are no signs that it can—or should—try to push the private sector out of a product that insurance companies have offered for decades at affordable rates. Adding wind coverage to the NFIP would be irresponsible and just force taxpayers to subsidize yet another policy failure.