Hundreds of people drop their flood insurance as rates rise

When the Federal Emergency Management Agency overhauled the flood insurance program last year, they wanted to encourage homeowners to buy Learning by showing them exactly the risk that each property is facing flooding.

But instead, tens of thousands of people have dropped their FEMA policies, raising concerns that many families with financial problems will be devastated.

Records reviewed by E&E News show that more than 425,000 people have stopped receiving reimbursements for their properties through FEMA’s Flood Insurance Program since October, when FEMA began revaluing millions of properties to more accurately reflect flood risk. FEMA also lowered the cost of housing for hundreds of thousands of properties where prices were too high.

The NFIP provides the majority of insurance in the country and has been trying for years to increase the number of households affected by floods as climate change and development increase the damage caused by floods. Flood insurance is sold separately from homeowner’s insurance.

But its FEMA documents and consulting with insurance companies shows that so far, the reform is doing the opposite, which is causing some people to let their money go away when they are given a lot of insurance money.

“It’s going to hurt them,” said Tammy Whitehead, an insurance agent in New Orleans who opposes the FEMA overhaul.

The number of NFIP policies has dropped from 4.96 million on Sept. 30, 2021, to 4.54 million as of June 30 – a decrease of about 9 percent.

It is unclear how many people who opted out of NFIP policies purchased flood coverage through private insurance.

Tuna Siraci, president of the insurance company National Flood Insurance LLC, said that insurance companies are taking advantage of the increase in NFIP rates and are starting to offer flood coverage, which insurers have avoided for years because the losses are dangerous and unpredictable.

“The flood insurance sector is booming,” Siraci said.

FEMA told E&E News that “there are many factors that can affect policyholder downgrades, including the economic impact of the pandemic, inflation, the housing market, and the ability to afford or purchase flood insurance in the general market.”

“We are confident that policies will increase, over time, under our new Risk Rating system,” said FEMA spokesman Jeremy Edwards, referring to the agency’s reform process, called Risk Rating 2.0.

An internal FEMA report in December predicted that the number of NFIP policies would drop to 4.04 million by 2030, although the agency said that projections represent a “pessimistic economic model” (ClimatewireJuly 25).

The decline in the number of people with NFIP policies raises fears that many people whose homes have been flooded will not be able to rebuild or refinance, and that low-income families will suffer. Only about four percent of households in the country have access to flood water.

“Unfortunately, those who need insurance the most are those who can’t afford it,” said Carolyn Kousky, a flood insurance expert and associate vice president for finance and policy at the Environmental Defense Fund.

Kousky said the decline in insurance coverage shows the need for Congress to create a subsidy program that helps low-income families purchase flood insurance. A flood plan through the NFIP costs about $1,000 a year.

“There’s a lot we can be doing to improve flood risk communication. Just telling people they’re in the SFHA isn’t enough,” Kousky said, referring to special flood risk areas, which FEMA defines on flood maps to show properties at high risk of flooding. .

Sen. Bob Menendez (DN.J.) said in a statement to E&E News that as hurricanes continue to grow, “more uninsured homes are a recipe for financial hardship for working and middle-class families across the country.”

“We need to focus on having affordable insurance,” said Menendez, who has been a vocal opponent of FEMA insurance reform.

Many of the people who drop out of NFIP policies are those who don’t need flood coverage and who faced higher premiums when their policies were renewed in recent months, said Whitehead, the insurance agent.

Federal law requires flood insurance for homes that are at high risk of flooding and is protected by a federal mortgage.

But many people with NFIP coverage don’t need it because they live in low-risk areas or don’t have a mortgage.

Whitehead said people who buy flood coverage voluntarily are canceling their policies.

“They raised prices for people who don’t have to carry it and who are at very low risk [flood] zone,” said Whitehead. “It’s just common sense. If you don’t have to carry it and it’s going to cost me more, why should I carry it?

Siraci, the brokerage’s president, says 90 percent of people who opt out of NFIP coverage are not required to have flood insurance.

“Even before, when policies were $500 … it was difficult to have homeowners buy voluntary insurance,” Siraci said. “Obviously if the money goes up three times, that’s a big reason not to go ahead with the plan.”

‘Very dangerous’

FEMA records show a significant decline in so-called catastrophic policies that cover properties in areas with a high risk of flooding.

The number of these plans dropped from 1.91 million on Sept. 30 to 1.26 million on June 30 – a decrease of 34 percent.

An E&E News review of FEMA records also shows the biggest decline in NFIP policies has occurred in upstate states, where fewer insurance claims have been filed since the program was created in 1968.

The states with the lowest rates are Minnesota, Arizona, Wyoming, North Dakota, Nebraska and South Dakota.

The states with the lowest tax rates also include high-income coastal states such as New York, New Jersey, Maryland and Hawaii.

Sen. John Kennedy (R-La.), a vocal critic of FEMA’s insurance reform, said the new program is “already hurting Louisiana’s flood risk” and “robbing Louisiana families of the flood protection they need. .”

Louisiana, which has sustained some of the worst flood damage in the country, saw an 8.5 percent decrease in NFIP regulations since October.

“The truth is that it is the responsibility of carrying flood insurance in many parts of our country, but especially in Louisiana,” Rep. Troy Carter (D-La.) said in a statement.

“However, the high cost of flood insurance under Risk Rating 2.0 is causing people to not take action,” Carter added. Especially with the climate crisis exacerbating severe weather across the country, this isn’t just bad policy – it’s dangerous.”