Newspaper article The Christian Science Monitor

Flood Prompts New Look at Federal Insurance Plans

Newspaper article The Christian Science Monitor

Flood Prompts New Look at Federal Insurance Plans

Article excerpt

WHO'S going to foot the bill for the catastrophic flooding in the Midwest? You are.

Relief provided by federal insurance programs will be only a drop in the bucket of billions of dollars in damaged crops and wrecked homes. Most of the other cleanup funds will have to come directly from taxpayers.

President Clinton already has pledged $1.2 billion to help cover crop losses. The federal crop-disaster fund holds about $400 million at the moment, so Congress will have to appropriate $800 million to cover the damages. An emergency bill, not subject to deficit-reduction goals, will soon be introduced for that purpose.

Uninsured farmers can expect to receive compensation for about half of their crop losses. Uninsured homeowners won't do as well. Those who don't qualify for low-interest loans from the Small Business Administration may get grants of up to $11,900 from the Federal Emergency Management Agency - not nearly enough to pay for the cost of rebuilding a house. Even so, FEMA plans to ask Congress for extra funding for the Midwest flooding.

Why aren't federal flood-insurance and crop-insurance programs paying a greater share of the costs? The biggest reason is that few people in the affected regions - or anywhere else - have bought the low-cost, government-subsidized insurance policies.

There are an estimated 6 million to 8 million structures located in flood-prone areas, but the National Flood Insurance Program has sold only 1.8 million policies there. Likewise, the Federal Crop Insurance Corporation has sold policies to about 35 percent of the eligible farmers.

Insurers lay much of the blame for lack of coverage at Congress's feet. "Congress has been so reliable in throwing money at them that a lot of farmers have stayed away from the insurance program," says Paul Horel, president of the Crop Insurance Research Bureau in Overland, Kan.

From 1980 to 1990, the United States Agriculture Department spent $6.2 billion to subsidize crop insurance, but also forked over $8. …

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