Romano: Either fix flood insurance problems or be prepared for disaster

Sooner or later, our luck is going to run out.

And then we'll be the sad losers watching helplessly as homes and dreams are consumed by floodwaters. Just like the unfortunate souls in Baton Rouge, La., last week, and just like folks in West Virginia and South Carolina in the months before that.

It's going to happen here. Maybe in the next few months, maybe in the next few decades. Our proximity to water is too near, much of our terrain is too low and our run-ins with storms too frequent.

The only doubt is whether Congress fixes our flood insurance problem before the storm arrives.

"If all of these historic rain events we're seeing don't get politicians to do something,'' said Michael McShane, finance professor and co-director of the Emergent Risk Initiative at Old Dominion University, "I don't know what will.''

There is an alternative out there if anyone in D.C. is willing to look. It's simple. It's proven. It may not be universally beloved, and could use refining, but it's better than seeing the National Flood Insurance Program go billions and billions further in debt at the expense of taxpayers.

Let's first look at the problem:

The majority of homes that seek/require flood policies are clustered in high-risk zones. Meanwhile, the overwhelming majority of low-risk homes do not carry flood insurance. That makes it a bad bet for private insurers. They don't have enough money coming in, and too much money going out. That's why private insurers have historically avoided flood policies, and it's why the NFIP is now in deep debt.

So what's the solution?

Spreading the risk by writing more policies.

The Florida Legislature, led by Sen. Jeff Brandes, R-St. Petersburg, has helped with legislation making it easier for private insurers to write policies. A bipartisan bill passed by the U.S. House, sponsored by Rep. Dennis Ross, R-Lakeland, and Rep. Patrick Murphy, D-Jupiter, would also help reduce private insurance impediments, but has stalled in the Senate.

Yet, there is a more foolproof and expedient way of doing this.

As McShane has pointed out in research projects, the problem was addressed in the United Kingdom by making flood insurance a standard part of all homeowners policies.

"By spreading the risk you create a sustainable flood insurance pool, and that's how it's supposed to work,'' McShane said. "The downside is there would be considerable political backlash.''

Yes, there would be backlash. There would be cries of taxes and socialism from people who say they don't need insurance and shouldn't have to subsidize waterfront businesses and homes.

There's some legitimacy to that argument, but it's short-sighted for a couple of reasons.

No. 1, we are already subsidizing those structures. The NFIP was $23 billion in debt before last week's disaster in Baton Rouge, which suggests that number will surely climb. And that doesn't even take into account the disaster relief funds provided by FEMA for uninsured homes the past decade.

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Rolling mandatory flood insurance into homeowners policies would be a more equitable solution because rates could reflect the risk involved. In other words, low-risk homes would pay substantially less. And considering Florida has only gotten pennies back for its NFIP premiums the past 35 years, the idea of spreading that risk around the nation should be appealing.

No. 2, most of the damage in Baton Rouge last week was in low- or moderate-risk areas. That means most of those people had zero flood insurance.

In fact, nationally, one out of every five flood claims comes from a low-risk or moderate-risk structure. Too many people think they are not at risk when they are, and too many taxpayers end up footing the bill for someone who should have had insurance. So why not ensure homeowners get coverage up front instead of taxing everyone after the fact?

"When your Realtor or lender says you're not required to get flood insurance, it doesn't mean you are immune from flooding or you shouldn't have insurance,'' said Chris Heidrick, a Sanibel agent who is chair of the flood insurance task force for the Independent Insurance Agents & Brokers of America. "It just means that it's not mandatory for your lender. Just because you might live on the right side of a flood line doesn't mean your house is in no danger of a flood.

"We ought to be learning a lesson from Baton Rouge.''

Actually, we should have learned the lesson after Katrina. Or Sandy. Or any of the other dozen or so flooding disasters we've seen in the past 10 years.

The current situation is neither logical nor sustainable. The NFIP is up for re-authorization in Congress in 13 months, and it would be foolish to simply kick the can down the road with a few tweaks.

The storm is coming.

We need to be prepared.