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The Long and Winding History of Flood Insurance


Apparently there are big changes coming to the National Flood Insurance Program and so Jim suggested I write on blog about those changes. As I began to do my research, one thing quickly became clear:  flood insurance is confusing! I decided that before I could write a blog on the changes coming to flood insurance, I needed to do a blog on the history of flood insurance.

Well, I learned just as quickly that the history of flood insurance is quite involved itself…and therefore just as confusing. I turned to a publication issued in 2005 by The American Institutes for Research: A Chronology of Major Events Affecting the National Flood Insurance Program. Compiled for FEMA (the Federal Emergency Management Association), this chronology outlines – in vivid detail – the step-by-step evolution of flood insurance in response to changes in American culture and topographical consequences. Suffice it to say, from the inception of the concept, research has abounded, legislation passed, and amendments been made to such legislation…on a continuous basis. So, let me try to give you a quick synopsis of just a few key events in the evolution of flood insurance…

A national system of flood insurance was recommended in 1951 by President Harry Truman following massive flooding in Kansas and Missouri that resulted in more than $870 million in damages. Over the years, national disasters resulting in significant costs of damage continue to spur ongoing research by federal agencies in cooperation with the states. Eventually, the National Flood Insurance Act of 1968 created the National Flood Insurance Program (NFIP) to provide flood insurance in communities based on the identification of flood-hazard areas and established actuarial rates. In 1969, the first flood insurance policies were sold. In 1972, the initially-established rates were lowered and revisions were made to eligibility requirements to encourage sale of the insurance. The trend of redefinition and amendment has continued through the years. In 2005, the disastrous losses suffered after 8 tropical storms, most notably Hurricane Katrina, led to a serious push for change to the National Flood Insurance Program.

Without presenting too many confusing details – because, believe me, if you read through that entire chronology your head may spin! – suffice it to say, the evolution of the National Flood Insurance Program includes a significant amount of scientific research and financial consideration. Procedural changes throughout the years have not been made without significant merit.

Flood Insurance may be one of those things we don’t think about until there is a disaster. Next week I’ll try to tackle the most recent changes coming to the program…

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