Thursday, October 01, 2009

What a ripoff!

I read the following article in a report from

Read it carefully. It looks like insurance companies which only sell the Flood insurance coverage provided through FEMA, (a Federal Agency) are keeping almost HALF of the money collected.

Let's analyze this: Agents of private insurance companies, who also sell hurricane insurance, and homeowner insurance, offer the flood insurance coverage as an additional and almost universally requested coverage. These insurance companies are basically order-writers. This service costs the government's insurance company almost 50% of the money collected. It's like you as a salesperson at a bakery's counter would keep fifty cents on every dollar collected! Believe me, selling these Flood insurances to people who must buy the other type of home insurance does involve any marketing effort.

But that is something that we have grown accustomed to. Insurance companies just keep feeding on our stupidity, our acceptance of their and our government's corruption. Because how else can we qualify the conduct of FEMA which for so many years has been condoning this ripoff!

Does this ring a bell?

Here is the report I read:

Criticism mounting over flood premiums

Congress is expected to extend the National Flood Insurance Program (NFIP) for another 12 months even though the program continues to be in debt and accused of lacking adequate controls. The NFIP, which is run by the Federal Emergency Management Agency (FEMA), also has been criticized for shifting too much money to the insurance sector. A Government Accountability Office (GAO) report revealed that FEMA does not have a system in place to track the profits earned by insurers in the program, nor a way to determine if those profits are appropriate. “There are certain things to be learned,” says Insurance Information Institute President Robert Hartwig. “If the price charged for the service rendered does not cover the cost, you will ultimately run a taxpayer-financed deficit.” NFIP earns about $2.3 billion in premiums per year, but insurers retain about $1 billion. Auditors discovered that FEMA does not examine insurers’ actual expenses when determining what share of the NFIP premiums they will receive. GAO also noted that the insurers involved in the program do not actively sell flood insurance, but merely offer the coverage only when policyholders ask for it. Auditors also note that FEMA has not done enough to prompt insurers to market flood coverage to a broader group of policyholders.

From - Oct. 1, 2009

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