Flood insurance policies plunged before Harvey
WASHINGTON» Houston’s population is growing quickly, but when Harvey hit last weekend there were far fewer homes and other properties in the area with flood insurance than just five years ago, according to an Associated Press investigation.
The sharp, 9 percent drop in coverage means many residents fleeing Harvey’s floodwaters have no financial backup to fix up their homes and will have to draw on savings or go into debt — or perhaps be forced to sell.
A former head of the federal flood insurance program called the drops “unbelievable” and criticized the Federal Emergency Management Agency, which oversees the program.
“When you start to see policies drop like this, FEMA should have done something about this,” said Robert Hunter, who ran the program in the late ‘70s. He estimates that fewer than two of 10 homeowners with flood damage have flood insurance.
Houston’s Harris County has 25,000 fewer flood-insured properties than it did in 2012, according to the AP’s review of FEMA data.
In percentage terms, the drop was even more dramatic in certain sections of the county: In Pasadena, just southeast of Houston, policies were down nearly 20 percent. Baytown, east of Houston, saw a 22 percent drop.
The trouble extended beyond Houston, too. Jefferson County, home to cities like Beaumont and Port Arthur, which Harvey hit Wednesday, saw a bigger drop. That county fell from 25,818 policies to 19,773 in the past five years, a 23 percent decrease.
The current head of the flood insurance program, Roy Wright, attributed much of the drop in the Houston area to Congress’ decision in 2012 to raise premiums, and said there is a “true insurance gap” across the country: Only half the 10 million properties in the U.S. that he said need flood coverage have bought it.
He said he is working to close to gap but noted that the decision to keep or drop coverage largely lies with individuals.
“I can educate and make the product available, but ultimately this is a pocketbook decision made by each individual homeowner, and I imagine they have a lot of factors they take into effect,” said Wright, director of the National Flood Insurance Program.
Experts say another reason for lack of coverage in the Houston area was that the last big storm, Tropical Storm Allison, was 16 years ago. As a result, people had stopped worrying and decided to use money they would have spent for insurance premiums on other items.
“Allison was a once-in-500-year flood,” said Texas A&M University economist James P. Gaines. “We weren’t supposed to have another one.”
FEMA’s director, Brock Long, told the AP on Wednesday that storm victims who have lost their homes and are uninsured could seek assistance through the Small Business Administration, which offers loans.
The average per year cost for premiums in Harris County rose from $514 in 2012 to $555 this year, an increase of 8 percent, according to FEMA data. Congress repealed its 2012 premium hikes in 2014.
Jesse Trubia, president of a metal fabrication company, decided to pass on flood insurance when he moved to his two-story home on the outskirts of Houston several years ago. That decision will now cost him up to $30,000, he estimated.
Up to one foot of water seeped into his home in Cypress, he judges from a neighbor’s report, ruining furniture, plasterboard, paint, carpets and wooden flooring.
He said a real estate agent and title insurance company had given him the impression he did not need flood insurance, because his home wasn’t in a flood plain.
“Of course, you have that gutwrenching feeling now, but at the time I’m talking to people who live in the neighborhood 10 or 15 years, and they say they’ve never seen water in the street,” he said by phone from a Dallas hotel, where he had fled with his wife and two children.
Loretta Worters, a spokeswoman for the insurance industry’s Insurance Information Institute, said she was not surprised at the drop in flood policies in the Houston area. She said polling performed for her group showed that only 12 percent of American homeowners in flood-prone areas were insured against flooding in 2016, down from 14 percent in 2015.
“There’s a naivety on the part of people. A lot of people think it’s not going to happen to them,” she said.
Several Houston-area homeowners and insurance experts also attributed the decreased coverage to tight family finances in recent years due to the drop in oil prices and the region’s reliance on that industry.
“The price of oil has gone up and down like a yo-yo, and with those ups and downs come a lot of jobs lost over the years,” said Mark Hanna, a spokesman for the trade group Insurance Council of Texas. “A lot of it has to do with what comes first: flood insurance or food on the table.”