The National Flood Insurance Program was created back in 1968 by the National Flood Insurance Act to serve two purposes; to ensure that both public and private property, as well as structures at high risk of flooding, would be offered primary and affordable flood insurance and at the same time ensure a flood risk reduction by adopting floodplain management standard. The program purposes minimizing the socio-economic effects of natural disasters, specifically floods, by advising property owners to own and retain general risk insurance. Since its establishment, the program has faced criticism and support at the same time, with people having different opinions as to whether it is an excellent program that is beneficial to the citizens or not. The purpose of this discourse is to elaborate on the suitability and saliency of the program in managing emergencies at the federal level.
Keywords: insurance, floods, National Flood Insurance Program
Importance of the Program
The private insurance industry found it uneconomical to offer the much-needed flood insurance under terms and conditions which were reasonable to the local citizens (Brown, 2016). The federal government's resources thus became overstretched as a result of trying to cater for the losses that were often incurred after floods. To prevent this burden, the Congress came up with the program that not only manages the losses but also pushes for the adoption of measures aimed at preventing and protecting against floods thereby limiting the damages that follow after flooding. The program, therefore, is good as it allows for the national resources to be utilized elsewhere thus contributing to the growth of the nation’s economy rather than catering for post-flood losses. Therefore, the program helps the federal government in reducing its expenditure as it shifts the cost of flooding and its consequences to those at risk of the same. The federal government, therefore, instead utilizes its resources in other sectors such as health and security, which would be affected if the same resources were to be shared or redirected towards helping in recovering flood losses culminating in increased expenditure.
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The National Flood Insurance program also has a positive impact on federal expenses and assistance (Wetmore et al., 2006). The program has rules that govern the construction of buildings that can resist damaging through floods. Therefore, when flooding occurs, the federal government does little in terms of assistance and expenses such as temporary housing and removal of debris for the affected people, especially in cases where buildings remain undamaged after floods due to competent construction under the rules of the National Flood Insurance program.
Furthermore, the program avails flood insurance to property owners at reasonable terms and conditions thereby preventing exploitation by the private insurance companies. In essence, in a situation where private insurance companies were a monopoly, if they deemed it uneconomical to offer floods insurance to business entities and homeowners, the federal government would have been devastated. This is because the government relies on the taxes that the business owners and tenants pay, as well as the workforce of the homeowners who would face difficulties getting back their operations. Therefore, through the program, the federal government promotes ownership of business premises which improves the economy of the nation by providing employment opportunities and taxes that the businesses return to the federal government, money which is, in turn, used for national development.
Additionally, claims for flood insurance by the National Flood Insurance Program are paid without having to wait for the president to declare a flood disaster. It, therefore, offloads the responsibility from the head of the federal government thereby letting him focus on other matters and at the same time provides a quicker way for owners of business premises and homeowners to get back to their feet and get their business and lives going immediately after flooding. According to the National Research Council (2015), the annual average cost of securing a flood insurance policy is 600 dollars, while for those who live in areas with moderate or low-risk levels of flooding; the amount is as low as below 200 dollars. In the event of continuous or repeated occurrences of floods, a National Flood Insurance policy remains operational and uninterrupted. Therefore, repeated losses do not cancel or render a policy non-renewable; this provision is reliable in cases where repeated cases of floods may occur. It thus benefits the federal government as it offers an essential service to citizens at a relatively affordable cost.
References
Brown, J. T. (2016). Introduction to FEMA’s National Flood Insurance Program (NFIP). Congressional Research Service , 16 .
National Research Council. (2015). Affordability of national flood insurance program premiums: Report 1 . National Academies Press.
Wetmore, F., Bernstein, G., Conrad, D., Larson, L., Plasencia, D., Riggs, R., & Shapiro, M. (2006). An evaluation of the National Flood Insurance Program: final report. American Institutes for Research, Washington DC .
