Flood Insurance Profits? Maybe Not | James Howard Flood Insurance Profits? Maybe Not | James Howard

Eur Ing Dr James P. Howard, II
A Mathematician, a Different Kind of Mathematician, and a Statistician

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Flood Insurance Profits? Maybe Not

NPR has made a lot out of a report that insurance companies made $400 million in profit from flood insurance. This does not seem likely.

When I wrote my text on flood insurance, I was unable to disaggregate profit numbers. Also, some of the figures given in the NPR report are simply incorrect. For instance, they show that 1/3 of premiums go to insurances companies. Insurance companies receive 15% to manage record keeping, sales, and claims processing. In addition, companies that sell well get up to 2% more, capping the amount insurance companies are paid at half of the 1/3rd given by NPR. Contrary to report’s tone, this is not free money. Insurance companies do quite a bit to work for it.

When I asked NPR on Twitter how they how they got the $400M number several days ago, I received no response.

Absent substantial data and explanation, $400M is a little hard to swallow.

Image by frankieleon / Flickr.