Disasters could be less disastrous

No region of the United States has a monopoly on catastrophes. Our communities are exposed to floods, hurricanes, tornados, earthquakes, droughts and fires. Some of us are more accustomed to seasonal flooding and high winds, and others to drought and fires. We never know precisely when they will arrive, but we know they will surely bring havoc, threaten lives, and cost more than we can afford. History teaches us where these calamities will repeat frequently and if we have any sense we will act on that lesson.

SmarterSafer Coalition, a national and diverse pro-consumer organization, is acting on the lesson. Their study, “Bracing for the Storm,” provides a clear results and policy suggestions from decades of disaster handling.

{mosads}They find that consumer safety and pocket books were put at risk too many times for too long.  Scores of Federal, state, and local government agencies operate courageously on the front lines to recover our communities from disasters, and in back rooms they to plan and coordinate those recovery efforts. Unfortunately the planning is often ineffective and the spending misallocated.  

The most efficient and effective use of our resources is to mitigate the human and infrastructure exposures before any disaster. Each $1 spent on mitigation reduced the post-disaster spending by $4 to $5. Yet perversely, less than 0.4 percent of total spending is devoted to mitigation, while 99.6 percent is spent on disaster recovery.  

Post-disaster spending is often scattered across the country or concentrated on projects that have nothing to do with disaster relief, e.g. $2 billion in Superstorm Sandy funds was spent on road construction across the country, and billions more were spent for housing and development projects. Too much goes for post-disaster coordination costs among the excessive number of agencies who demand to have a role. Eighteen percent of funds go to administrative costs. Thoughtful planning and practice in advance could produce a more rational, efficient response after the event.

Perversely, instead of moving to safety, Americans are moving into danger zones. More than two million new homes were built in coastal areas between 1990 and 2010 and 100 million people, live in low-lying coastal regions, including Louisiana and Florida. In the West, 1.2 million homes (worth $189 billion) are at high or very high risk from wildfires.

Many beach dwellers who experienced disaster return for another calamity, often in rebuilt homes subsidized by those who live far from the water’s edge. The National Flood Insurance Program (NFIP), reports that 38 percent of its claim costs are attributable to repetitive losses incurred by just 1 percent of its customers. By subsidizing that failure to learn we have helped push NFIP into $23 billion of debt.  

Setting premiums high enough to cover risk is a good start. Currently, some premiums cover less than half the risk. Congress tinkered with the Biggert-Waters Flood Insurance Act of 2012 by applying flat surcharges in NFIP that burden the rest of us instead those who choose high risk home locations. Instead of continuing to underwrite losses of the monopoly NFIP, Congress could allow private insurers to enter the market under fair conditions.

Inaction on setting sane insurability standards for flood insurance and risk-driven premiums could turn NFIP’s debt into a runaway catastrophe. Rising sea levels and the accelerating pace of hurricanes are forecast to produce $360 billion in water damage to residential real estate and $422 billion in hurricane damage by 2100. The cost of fighting wildfires rose to $1.7 billion in 2013, consuming 40 percent of the U.S. Forest Service budget. Since the Department of Agriculture predicts burned acreage will double by 2050, the Forest Service budget will need a large increase. We can be swamped by the natural disasters headed our way unless we act.

Consumers have too much at stake for elected officials to feign ignorance. We ask the Congress to lead by demanding actuarially sane NFIP premiums, limiting the number of repeat payouts for properties in high-risk locations, allowing private insurers to help by insuring all natural disaster risks, and increasing the funding devoted to genuine risk mitigation.

It’s time Congress act by focusing on prevention and creating the right incentives for mitigation, rather than wasting billions more on cleanup.

Daley lives in Florida and writes for The American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. The Institute is allied member of SmarterSafer Coalition. For more information about the Institute, visit www.theamericanconsumer.org.