FEMA Report: Flood Insurance Increases Will Take 1 Million People Out of Market Business News
Street. Lewis – When questioned by members of Congress, the Federal Emergency Management Agency said its new update of the country’s flood insurance program will urge more people to sign up for coverage, even though many will pay more for it.
But in a FEMA report obtained by the AP under the Freedom of Information Act, the agency estimates that a million Americans will purchase flood insurance by the end of the decade — a large number of people at risk of catastrophic financial losses.
As climate change increases flood risk in many parts of the country, FEMA has updated the flood insurance program to more accurately reflect the risks, but also make the program more fulfilling. It is a partial response to criticism that taxpayers were making large payments when coastal mansions in perilous locations were flooded.
But nine senators from both parties expressed “serious concerns” about the new pricing system in a speech last September, after hearing that the agency’s internal figures predicted a 20% policy drop. The following month, FEMA told the Associated Press that these numbers were “misleading” and “taken from context” and that on the topic of how many people would be insured, “there is no study or report to participate.”
The agency painted a different picture, but at the end of the year, when it sent a report to the Treasury secretary and a handful of congressional leaders, they said higher prices would result in a million policy cuts compared to the beginning of the decade.
The issue of how many people don’t have flood insurance is vital, said Chad Bergenis, executive director of the state’s Flood Plains Managers Association.
“We’re talking about basic economic health, I’m not just thinking about our homes and businesses, but our communities in general” if fewer people would buy flood insurance, he said.
The Federal Flood Insurance Program began when many private insurance companies stopped offering policies in high-risk areas. You run red, and you pay more in claims than you collect in premiums. By setting rates more precisely, the update, formally referred to as Risk Rating 2.0, makes development more expensive in flood-prone areas, shifting disaster risk toward homeowners.
The 2.0 risk rating will take into account the property’s unique flood risks – such as distance to water and the cost of rebuilding. The old system was largely dependent on the height of the house and whether it was in a designed flood area. Most policy holders will now see their rates go up. But for the first time, nearly a quarter of policyholders will see a drop in their rates. Buyers of the new policies started seeing the new prices in October.
The Federal Emergency Management Agency downplayed the report obtained by the Associated Press as a pessimistic projection, intended to forecast financing, not insurance involvement. The agency said it did not directly consider how many people would buy flood insurance.
“There are many reasons why growth may occur over time,” said David Morstad, a senior executive with the National Flood Insurance Program, adding that the registry analysis should take into account the agency’s marketing efforts, and the program’s clear messages about the risks involved. Flood, lower prices. and other factors.
But critics such as Senator Bob Menendez, Democrat N.J. , they said that affordability was an issue and that FEMA had not disclosed the impact of those higher costs.
“This report makes clear that FEMA has failed to be transparent with policyholders, Congress, and ultimately the American public,” Menendez said in a statement. He should not have taken a records request for details.
When Francesca Acuña, a climate and community activist in Austin, Texas, got a new quote, it was hard for her to believe.
“I go,” she said, “No, you’re making a mistake.”
Acuña previously paid $446 a year. Under a risk rating of 2.0, it was quoted at $1,893. Rate increases of this magnitude are rare. Increases are generally set at 18% annually, but Acuña, who has been juggling other expenses, has let her policy lapse, so she was asked to pay the full amount immediately.
“There is no way, nor how can I,” Acuña said.
Morestad, who has been told about Acuña’s situation, said the rates reflect actual risks. It is unfortunate that people are facing big increases, he said, but that ensuring the program’s financial soundness and accurate rates, is “good public policy”.
Jim Rollo, an insurance agent in New York, said he’s seeing a change in some buyers’ attitudes. Some seem more skeptical of previously flooded properties that have higher premiums. Others “roll the dice” and forgo costly insurance if it’s not required.
“We are writing less policies than we were before,” Rollo said.
Congress should create an affordability program for people struggling to buy insurance and fund efforts to improve flood protection, said Joel Scata, an attorney with the Natural Resources Defense Council, an environmental advocacy group.
But Morstad said the agency’s mission is different from that of the private sector. FEMA must assist people “before, during, and after” disasters as well as collect risk-based and financially sound insurance premiums.
“We have certain responsibilities that we are assigned. The number of policies sold is not one of them, again, because we are a government programme.
However, the agency’s report expects that the program, even as revenue rises, will continue to plunge further into debt.
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