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California Considers Ditching Federal Flood Insurance For State-Run Program

SACRAMENTO (CBS13) — California is overpaying for flood insurance, according to a report from a UC Davis research group. And now the Department of Water Resources is considering a state-run flood insurance program that could save billions of dollars.

"I was afraid to add it up. It's a lot," said Sharon Rojo, a Northgate resident for the last 45 years.

She and her husband have paid flood insurance since Day 1.

"You don't have an option," said Roger.

For more than 55,000 homeowners in Sacramento County living in flood prone areas with a federal mortgage, flood insurance is mandatory through the National Flood Insurance Program.

Californians have been paying into the federal pot for decades. And in the last 21 years, they haven't collected.

"There was only one year when California got more back in payouts than it paid in premiums. That was only just barely so," said Nicholas Pinter, a Geology Professor at UC Davis.

He led a research team that found the state has drastically overpaid for flood insurance.

"Over $3 billion more paid into the program than the state has gotten out as disaster payouts in those 21 years," said Pinter.

Pinter's team suggests dropping the feds and providing state flood insurance.

"Allowing that money, those $3 billion to be invested in other areas. like lowering flood risk, maybe lowering flood premiums within the state," explained Pinter.

"Flood control is kind of a never-ending game," said Paul Devereux, the general manager for Reclamation District 1000. He oversees the levee system that protects 55,000 square miles of the Natomas basin.

"This year was a good test of our system, but I'm happy to report that we came through it with really no problems," said Devereux.

If Pinter's study is correct, and money is saved from state-run flood insurance, risk improvements could be made.

"The money should stay here for us. For the state," said Rojo.

Private insurance companies are already lining up in case the state pulls out of the federal program.

Pinter says some drawbacks to a state-run program could include the private companies snatching up the low-risk premiums. Administrative costs and overhead could also cut into the potential savings.

The state will be looking at the feasibility of running a flood insurance program over the next few months, according to a report put out by the Department of Water Resources.

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