Fox News’ John Stossel railed against the National Flood Insurance Program during an appearance on Fox & Friends on Thursday, blaming the government for encouraging people to build homes in high-risk areas and arguing that private companies should take over the practice.
During the segment, Stossel showed pictures of his own beach front property and explained that while he supported repealing program, he did purchase its coverage and planned to collect its benefits. The contradictory position stumped conservative guest host Peter Johnson Jr,. who couldn’t understand why the longtime libertarian would voluntarily benefit from a governemnt program he opposes:
PETER JOHNSON JR: Wait a second. That are not on the beach that, are not on river fronts that are blocks in that never anticipated that the ocean would come, that the bay would come. They paid their premiums. They’re not rich people like you were. If you’re so rich, why don’t you give the money back? […]
STOSSEL: Why was the federal government selling it? I blame the politicians. We don’t have special car insurance for Lindsay Lohan. … I paid the premium. I’m going to take the money. Of course you’re going to take the money. […]
STEVE DOOCY (HOST): You know John, I know you collected three times from the federal government, it was an absolutely great deal…
The federal government established the National Flood Insurance Program in 1968, after private insurers deemed the peril of flood “uninsurable.” The NFIP provides direct coverage for properties and contracts with some 90 private insurers, who mostly service insured properties but bear no insurance risk.
Private insurers were always reluctant to cover floods, noting that they couldn’t possibly “earn excess premiums to cover their cost of capital (they have to pre-fund losses), whereas the U.S. government can easily borrow money to cover catastrophic flood events after they occur.” Unlike private companies, the government can also require homeowners in flood hazard areas to purchase insurance, thus mitigating the problem of adverse selection, wherein only high-risk homeowners buy coverage.
The program has failed to discourage construction in storm-vulnerable areas — it had required county and local governments “to enact zoning and building rules to reduce construction in flood-prone areas” — and in some cases even “paid to have some homes rebuilt multiple times.” Stossel’s beach front house has been rebuilt at least three times — much of it using the federal dollars that he is paid to oppose on television.