Congress must not sink flood insurance program

This Oct. 30, 2012 aerial file photo provided by the U.S. Air Force shows flooding in Mantoloking, N.J., on the New Jersey shoreline caused by Superstorm Sandy.
This Oct. 30, 2012 aerial file photo provided by the U.S. Air Force shows flooding in Mantoloking, N.J., on the New Jersey shoreline caused by Superstorm Sandy. U.S. Air Force

Only a year ago, Congress finally approved a plan to provide financial stability and more accurate risk assessment for the federal flood insurance program.

But now that some property owners, particularly in low-lying areas along the Gulf Coast, are seeing the potential hit to their pocketbooks, some members of Congress want to delay and change some of the new law's provisions. Congress should be careful.

Some changes might be warranted. The Federal Emergency Management Agency, which oversees the National Flood Insurance Program, hasn't finalized its new flood maps, the key to implementing the new rules. The agency admits, for example, it hasn't -- so far -- taken into account levees and other flood control projects not built by the federal government that protect property from flooding. Some people also suggest that the flood maps should take into account flood mitigating characteristics, such as wetlands and forests. Both should be done.

But lawmakers should not put at risk the whole program because of the outcry of those most affected by the changes.

Let's not forget the complaints prompted by the program's being extended temporarily 17 times and allowed to lapse twice between 2008 and 2012. The National Association of Realtors praised the law after it passed in July 2012, particularly because it took away a lot of uncertainty with its five-year renewal. The group says a two-week shutdown of the program in 2010 stalled 40,000 home sales.

We also should not forget the program's $20 billion-plus deficit.

The new law also ensures continued access to the program, including for second homes and vacation homes. That's important. Federal flood insurance is required for homes with federally backed mortgages or from federally regulated institutions.

FEMA estimates that about 20 percent of the 5.6 million flood insurance policyholders receive subsidies. About 250,000 business owners, those owning second homes and those with frequently flooded properties will see increases first. The increases -- 25 percent annually until the full-risk premium is reached -- started Jan. 1 for second-home owners with subsidized policies. For businesses and properties that have experienced frequent flooding, the new rates go into effect Oct. 1, with the same 25 percent annual increase.

About 578,000 policyholders are expected to keep their subsidies until they sell their homes or suffer repeated losses.

New rates also can be triggered if:

  • The property is sold.
  • Flood insurance coverage lapses and the owner seeks new coverage.
  • The market value rises by more than 30 percent due to renovations or additions.
  • The property incurs damage of more than half its value.
  • A big impact of the new law is the loss of grandfathered rates. Under the old program, owners could keep their old rates because they had followed the rules in place when their homes were built. The new law phases out the grandfathered rates, increasing the premiums 20 percent a year for five years.

    Joe Cecil, an insurance examiner for the flood insurance program, earlier this year offered a good piece of advice: Property owners could keep their rates from increasing unnecessarily if they can prove the elevation of their property is higher than flood-plain maps indicate. Elevation certificates can be completed by licensed surveyors or engineers.

    "Anybody who lives in or very near a flood-hazard area should consider getting an elevation certificate done sooner rather than later," Cecil said.

    And we should remember that some property owners could see their rates decrease if the new maps show their properties at a higher elevation than before. The current maps were released in 1986 and partially updated in 1992.

    Most importantly, we should remember that we need to get the flood insurance program on sound financial footing. That starts with matching risk with real costs.