Members of Congress: Your Friendly Insurance Agents
Who knew? Members of Congress want to be insurance agents. Perhaps they are jealous of all the attention lavished on the gecko, the duck, and Flo.
In 2012, the wannabe congressional insurance agents wrote a new flood insurance policy. It's been around for a long time, and mandatory for everyone in a flood zone. But the low premiums, subsidized by the taxpayers, don’t bring in enough money to build up the reserves to pay the claims when the big one hits. So the taxpayers come to the rescue and bail out the program, of course at the same time helping fellow citizens who are in need.
In theory, the flood insurance program is going to pay back the rescue money. But at the moment, it is $24 billion in the hole.
So in 2012, our wannabe agents decided to put the flood insurance program on a sound actuarial footing. ("Actuarial" is a nice insurance word. They used it a lot in 2012.)
They passed the Biggert-Waters National Flood Insurance Reform Act, named after two of the wannabe insurance agents who are also members of Congress.
The bill passed overwhelmingly. How could it not? It was reform. It was actuarial.
You can’t really hold the wannabe agents responsible for what happened next. It was unforeseen. In point of fact, it was the result of unintended consequences. Voters started complaining about huge increases in their flood insurance premiums. Someone paying $1,000 a year was suddenly asked to pay $15,000 a year. Angry calls, angry voters. Something must be done.
Unintended consequences – the new pet phrase. Unfortunate unintended consequences. Serious unintended consequences. Here’s the best from one of the wannabe agents: “The Biggert-Waters bill was well-intended, but there were unintended consequences.”
So in 2014, to hold down premiums, the wannabe agents rewrote the flood insurance reform law they had passed in 2012. The new law passed overwhelmingly. Protecting their constituents from unintended consequences.
The cynics among us may say we need risk protection from these wannabe agents. But look on the bright side. What if they had done the same thing to health insurance?