Released: September 30, 2009

Criticism is mounting over flood premiums

Source: Mary Williams Walsh, NY Times (Free Registration)

Congress is preparing to extend the National Flood Insurance Program for another year, despite warnings that the program lacks adequate controls and may be shifting too much money to the insurance industry.

The insurance program, deeply in debt since Hurricane Katrina, operates as a public-private partnership, collecting more than $2 billion in annual premiums. The Federal Emergency Management Agency runs the program, and the government bears all the risk.

But the insurance policies are sold by individual companies under their own names, and those companies handle claims, pocketing a portion of the premiums and forwarding the rest to the government.

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