Flood Insurance for Dummies, and Trent Lott

The New York Times reports that Senator Trent Lott is suing his insurer for refusing to pay up for his Gulf Coast Mississippi house flooding during Katrina, although flood damage is excluded from his policy and the Senator recognized that by taking out a federal flood policy from which he collected $350,000. To collect more, Senator Lott has threatened the insurance industry with punitive legislation.

Senator Lott, if he weren’t so self-involved and self-important, might have taken the time to read Sebastian Mallaby’s column in the Washington Post, “Flood Insurance for Dummies,” and might begin to act like a Senator instead of a rapacious dummy.

The federal flood insurance program uses taxpayers' money to subsidize houses that are prone to flooding…The program is supposed to discourage building in areas that flood more than once per decade. But in 1995 there were almost 75,000 insured properties that had flooded at least twice in 10 years. Far from discouraging this sort of building, the program appears to encourage it: Ten years on, the feds now insure 134,000 two-floods-per-decade homes. Over the past decade, these houses have generated insurance claims worth $5.7 billion while paying less than $1 billion back in premiums.
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The insurance industry, which has billions of dollars on the table, cannot afford this sort of nonsense. It is focused on understanding climate patterns and devising rational responses. But government central planners are blind to the usefulness of price signals. So thousands of Americans build dream houses by the waters, oblivious to the risks and costs -- to themselves and to the rest of us.

This problem is not unique to the Gulf Coast. It costs taxpayers, and insurance payers, almost every year along the Calolinas’ coast, and even inland Central Valley California.

Irresponsible building in flood zones is subsidized by everyone else, and everyone else is supposed to be shocked and pay after every flood to maintain the homeowners’ irresponsible choice to have a luxury water view.

Senator Lott, you’re all wet.