Editorial: Flood insurance coverage

The National Flood Insurance Program could be in for a big overhaul if a proposal from Biden makes it through Congress. The regulation could have a major impact in Hampton Roads, where the insurance is critical even as efforts continue to reduce flooding, reduce damage and increase resilience.

It has long been clear that the NFIP, established in 1968, has been inadequate and poses financial risks. Congress created the program because private insurers shied away from providing flood insurance.

But climate change, which has been increasing in recent years, has disrupted the program. Global warming, largely due to burning fossil fuels, has led to rising sea levels and more frequent, unpredictable and intense storms. The NFIP was not expected to make a profit, but it was not expected to collect more than $20 billion in loans. And, as climate change and the growth of civilization make more areas prone to flooding, the need for insurance increases.

Some changes were implemented last October. But the changes must be made, and they must be done clearly.

One of the smartest ideas would be to create a national disclosure law requiring property owners to tell prospective buyers or lenders about a history of flooding or water damage. This may seem like a no-brainer, but Virginia is one of 21 states that does not have such a requirement.

Another major change would prohibit the NFIP from providing flood insurance to people building new homes on eroding shorelines and other areas prone to flooding. Anyone who wanted to build in this area had to pay a lot of insurance.

This may be bad news for developers and for people hoping for a new beach house, but it seems good that those who choose to build in unsafe areas should not expect other taxpayers to pay for the risk they willfully take. Such changes should reduce the amount of construction work in flood-prone areas.

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A similar arrangement would cost the state’s flood insurance premiums for people with “high-loss properties” — homes that flood repeatedly and require more than $10,000 in insurance each time.

At first, this change also makes sense. Why would you use tax dollars to support someone who maintains property that is repeatedly damaged by floods?

But critics point to a potential problem with looking at “extreme loss assets,” a problem that goes to the heart of debates about the purpose and effectiveness of flood insurance. Most of the people who live in dangerous houses like this, do not live there because they can afford a nicer house near the water. Many are low-income people who cannot afford to move out of low-income housing in flood-prone areas.

Similar criticism has been raised over a major change last October, when the NFIP adopted “Risk Rating 2.0,” changing the flood insurance pricing system to reflect the actual risk a community faces due to factors such as proximity to water, frequency of flooding and type of flood. the house. The change is expected to result in a significant increase in insurance premiums for high-risk properties. They were also supposed to provide a minimum wage that reduces flood damage through improvements that increase the durability of older buildings.

Critics say the change is setting premiums too low for high-risk groups and that incentives aren’t enough to encourage existing reductions.

Yes, state flood insurance was designed to serve people, not make money – but it wasn’t meant to be a bottomless pit of tax dollars. It is also true that the NFIP does not face the growing challenges of global warming.

Changes are needed, urgently, but the requirements are difficult. Reforms should aim to be as economically responsible as possible while not hindering risky development and promoting energy efficiency and mitigation. They must also be fair to everyone, including the low-income people who are already suffering.