Wednesday, September 28, 2011
According to a report by PC360, U.S. Senate approval of a plan expected to prevent a government shutdown will also keep the National Flood Insurance Program (NFIP) in business, at least through November 18.
The NFIP was scheduled to expire this Friday September 30.
An Insurance Information Institute (I.I.I.) issues update on flood insurance notes that Hurricane Irene and the Mississippi floods of 2011 caused widespread physical and economic damage, much of it uninsured, reigniting the debate on how to handle the risk of flooding.
The building of levees and other artificial barriers, and how to reform the NFIP, including the possibility of some form of privatization, are some of the keyÂ issues being considered.
Latest available data show that in 2010, the NFIP had more than 5.7 million policies in force, compared with 5.0 million in 2005, the year of Hurricane Katrina.
Still, many people donâ€™t buy flood insurance and many of those who purchase it donâ€™t keep it for long, as noted in a recent article in the Washington Post by Erwann Michel-Kerjan, managing director of the Wharton Risk Management Center:
Many people buy flood insurance when they buy a new house because the bank requires flood insurance proof to authorize a federally backed mortgage if the residence is in a flood plain. But they cancel it fairly soon after. Then, they suffer a flood and regret not having kept that coverage longer.â€
A Wharton study of flood insurance tenure under the NFIP published earlier this year found that in the period 2001-2009 the number of years that people keep their flood insurance policy before letting it lapse is on average only three years.
The same Wharton analysis found that during the 20th century in the United States, floods accounted for the most lives lost and the most property damage of all natural disasters.
Over the period 1950-2010, about two-thirds of all U.S. Presidential Disaster declarations were for flood-related events, Wharton found.
Indeed, a 2011 I.I.I. pollÂ revealed that just 14 percent of American homeowners had a flood insurance policy, below the 17 percent who said they purchased flood insurance in 2008.
Check out I.I.I. facts and stats on flood insurance.