Congress created the National Flood Insurance Program in 1968 as a way for the federal government to bear a risk that private companies wouldn’t. Since then, Uncle Sam has backed the vast majority of flood insurance policies in the United States.

Yet it is impossible to buy or renew such plans directly with the Federal Emergency Management Agency, or FEMA, which administers the program. Instead, the government relies upon a network of private companies to sell and service its policies—and hands them nearly one-third of the premiums the program brings in. Lately, that’s come to almost $1 billion a year.

“It is certainly something that should be examined,” said Stephen Ellis, president of the watchdog organization Taxpayers for Common Sense. “It would be one thing if it were a very high-performing program. Certainly that’s not been the case.”

The government’s flood insurance program is plagued by low-participation rates and is deep in debt. How its run has often drawn scrutiny, and earlier this year, a bipartisan group of lawmakers proposed legislation that would, among other things, cap the compensation paid to private brokers, who do not take on any risk. There also have been calls for FEMA to sell policies directly to consumers. Proponents of such changes say they would make it easier, and potentially cheaper, for property owners to obtain coverage, while saving taxpayers money.

“Flood insurance is a government service,” said Rob Moore, director of the Water & Climate Team at the Natural Resources Defense Council. “People should be able to buy it directly from FEMA. No question.”

FEMA and insurance companies say it isn’t quite that straightforward.

In 1983, FEMA enlisted private insurance agents in the effort to sell more policies. The government agreed to reimburse the cost of writing policies and processing claims. The hope was that allowing homeowners to use the same agents that sold other types of insurance would boost participation.

As dozens of companies joined the so-called Write Your Own, or WYO, program, flood insurance enrollment indeed grew. But the number of policies peaked in 2009, at 5.7 million, and has been declining since.

“Even with private insurance engaged, and advertising, it still sits right around five million policies,” Ellis said. (As of 2022, the figure is 4.7 million.) That’s a fraction of the roughly 100 million eligible properties.

Between 2017 and 2022, the NFIP paid brokers $5.82 billion in commission and expense reimbursements. That’s nearly 29% of all premiums brought in by the program, which is saddled with debt and loses billions of dollars annually. Reducing that cut by even a percentage point could save millions. But the Government Accountability Office, or GAO, has on at least two occasions critiqued FEMA’s approach to compensating brokers.

“FEMA sets rates for paying WYOs for their services without knowing how much of its payments actually cover expenses and how much goes toward profit,” the nonpartisan agency noted in a 2009 report. Three years later, Congress directed FEMA to reevaluate its compensation formula. But a 2016 GAO report found that hadn’t yet happened and recommended that FEMA “improve the transparency and accountability over the compensation paid to WYO companies and set appropriate compensation rates.”

The GAO still lists that recommendation as “unresolved,” and it remains unclear how much FEMA is over- or underpaying brokers. While the GAO found that some were not being reimbursed for all of their expenses, a 2019 FEMA rulemaking proposal noted that the 30.8% compensation rate that the agency pays them is well above the 25.3% in actual expenses they reported to an industry trade group. The difference is presumably profit, which could amount to many millions of dollars.

What is known is that in fiscal year 2023, FEMA agreed to pay WYOs 29.7% of premiums. That’s higher than the 20% cap that the Affordable Care Act generally places on the administrative, overhead, and marketing costs of health insurance sold through the government marketplace. It is also proportionally more than the 14% in expense payments that the Department of Agriculture has been giving companies to sell and service crop insurance for the past five years (the companies also get additional compensation as profit because, unlike WYOs, they take on crop insurance risk).

Roy Wright, who led the NFIP from 2015 to 2018, says such comparisons aren’t analogous because those programs are much larger. That allows for significantly lower overhead, he said. Still, he sees room for improvement.

“The operating costs have been the subject of a fair amount of debate,” said Wright, who is now the president of the Insurance Institute for Business & Home Safety. “I always think we should pay attention to how dollars are spent.”

One attempt to rein in costs came in June, when a bipartisan team of lawmakers introduced an NFIP reauthorization act that would, among other things, cap the compensation paid to private brokers at 22.46%. That would have saved the NFIP hundreds of millions of dollars last year alone.

“The NFIP has one million less policyholders than it did over a decade ago, but at the same time flooding, and subsequently premiums, has only increased,” said Senator Bob Menendez, the New Jersey Democrat who is among the four lawmakers who sponsored the bill. “High administrative costs are an unnecessary burden to current policyholders and a barrier to those who want to enter. It’s time Congress rebalances the WYO compensation structure to provide premium relief and mitigation grants to grow the NFIP and reduce its risk profile.”