National Flood Insurance Program in the Spotlight

C-SPAN is airing a video segment (39 minutes) on the National Flood Insurance Program (NFIP) that provides an overview of the program, in an era of increasing flood risks and rate increases under the Biggert-Waters Flood Insurance Reform Act of (July) 2012.

The segment, which interviews Stephen Ellis of Taxpayers for Common Sense, is reminiscent of this recent report by Union of Concerned Scientists (UCS).  In wrestling with NFIP’s ongoing insolvency post-Katrina, both view significant rate increases under Biggert-Waters as a logical if not necessary result of poor coastal land use planning.

Climate economist Rachel Cleetus authored the UCS report.  She summarized:  “The coasts are becoming more populated and built-up, so we have more people and more valuable property in harm’s way.  At the same time, climate change is contributing to sea level rise, generating more intense hurricanes, and causing bigger, more damaging storm surge.”

There are other necessary ingredients to this discussion.  Victims recovering from a disaster already face many challenges:

  • battles with insurers after being shortchanged in the claims handling process;
  • flood coverage limits of $250,000 for the structure under NFIP to begin with;
  • problems with some counterproductive public adjusters;
  • problems with some counterproductive contractors;
  • the added cost of remediating mold or oil spills;
  • the added cost of elevation requirements when there is significant damage, and sometimes contractor problems and delays that can arise;
  • local government approvals for rebuilding;
  • potential tax consequences;
  • ongoing questions over the timing and eligibility of grants for uncovered losses;
  • concerns about SBA loans offered to homeowners and how to pay them back;
  • how the overall expense of the rebuilding for these reasons will leave some homeowners owing hundreds of thousands of dollars in addition to their mortgage;
  • the difficult question of whether to rebuild or relocate given spiraling costs and stress, and the mortgage, financial, and credit consequences of any decision;
  • the fundamental loss of their homes and memories; and
  • the stress to families and children that arises from all of this.

Biggert-Waters was passed only three and a half months before Sandy, and it adds another important bullet to that mix by phasing in a more actuarial-based model of market rates.  This new law and the variety of other factors that affect NFIP premiums all require a great and probably unrealistic commitment by any homeowner to make sense of.  These factors include for instance FEMA’s flood zone mapping and map changes, the house’s date of construction and “grandfathering,” the extent of flood mitigation, elevation certificates, and how the policy is “rated.”  Consider the Lowest Floor Guide section of FEMA’s Flood Insurance Manual.  It contains 75 detailed hypotheticals on 75 pages, each showing the interplay of the different variables concerning how and where the house is constructed, and in turn what premiums will be.  There are nearly 25 additional sections of the manual dealing with other aspects of how policies are rated.

Another issue is the extent to which “floodplain management measures” have worked or not worked as a matter of coastal land use planning.  Communities must implement “floodplain management measures” as a condition of participating in the NFIP.  As FEMA summarizes, floodplain management measures “refers to an overall community program of corrective and preventive measures for reducing future flood damage. These measures take a variety of forms and generally include zoning, subdivision, or building requirements, and special-purpose floodplain ordinances.”  Floodplain management was supposed to be a “stick” that rationalized the carrot of affordable flood premiums.  Is Biggert-Waters a reflection that the stick is inadequate, or to what extent is climate change to blame?  More specifically, to what extent have land use planning tools — such as the basics of zoning, subdivision regulation, building requirements, and special-purpose floodplain ordinances and bylaws — been employed differently in NFIP communities?  What other creative mechanisms have been used?  To what extent have any of these measures been effective?  How have they been enforced?

This is all part of the same complex natural and human system.  It includes variables such as home ownership, social justice and poverty, land use planning, politics and economic policy, the history and evolution of the NFIP since it began in 1968, and recovery through resiliency in the face of climate change.  The system as a whole should be given a hard look before concluding that Sandy victims are getting “unfair subsidies” through NFIP.

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