As the waters of the Mississippi River swell beyond their banks, expectations on the overall cost of damages are nearing $2 billion, according to insurance officials. The National Flood Insurance Program (NFIP), the archaic insurance initiative installed by Congress in 1968, is likely to bear the majority of the financial burden. However, the program is already well into the red and the nation can ill afford to support the programs continued spiral into debt.
The fate of the program now lies in the hands of the U.S. Congress. On Thursday, they will determine whether the program will continue, or if it will be shut down. Of NFIP is dissolved, some 5.6 million homeowners will have to find new coverage. Homeowners relying on NFIP to help pay for damages to their properties will likely be compensated by the federal government, but how soon they will receive payment is unclear.
The major flaw of the program is that the cost of coverage does not accurately reflect the cost of the program, according to the Insurance Information Institute. NFIP is subject to what the Institute calls a “premium shortfall.” Roughly 30% of the money received in premiums actually covers the overall cost of the program. The rest of the funding comes from a series of bailouts provided by the U.S. Treasury Department.
Some members of Congress believe that the program should be liquidated or otherwise consolidated with another program. However, most agree that significant changes should be made that would keep NFIP in place.