FEMA report: Many will let flood insurance lapse
With price hikes on way, agency’s story changed
LOUIS – When questioned by members of Congress, the Federal Emergency Management Agency said its new update to the nation’s flood insurance program will prompt more people to sign up for coverage, even though many will pay more for it.
But in a FEMA report obtained by The Associated Press under the Freedom of Information Act, the agency estimates 1 million fewer Americans will buy flood insurance by the end of the decade – a sizable number of people at risk of catastrophic financial loss.
As climate change drives increased flood risk in many parts of the country, FEMA has updated its flood insurance program to more accurately reflect risk, but also make the program more solvent. It’s a response in part to criticism that taxpayers were funding big payouts when coastal mansions in risky locations flooded.
But nine senators from both parties expressed “serious concerns” about the new pricing system in a letter last September, after hearing that the agency’s internal numbers predicted policies would drop off by 20%. The next month FEMA told the AP those figures were “misleading” and “taken out of context” and that “there is no study” on how many people will be insured.
The agency painted a different picture, however, at the end of the year when it sent a report to the treasury secretary and a handful of congressional leaders saying higher prices would drive a drop of 1 million policies compared to
the beginning of the decade.
The federal flood insurance program was started when many private insurers stopped offering policies in high-risk areas. It operates in the red, paying out more in claims than it collects in premiums. By more accurately setting rates, the update, officially referred to as Risk Rating 2.0, makes it more expensive to develop in flood-prone regions, shifting the risks towards those homeowners.
FEMA downplayed the report obtained by the AP as a pessimistic projection, aimed at forecasting finances, not insurance participation. The agency said it has not directly studied how many people will buy flood insurance.
“There’s numerous reasons that growth could occur as time goes on,” said David Maurstad, a senior executive of the National Flood Insurance Program, adding that an enrollment analysis should consider the agency’s marketing efforts, the program’s clear messt.
saging of flood risk, price decreases and other factors.
When Francisca Acuña, a climate and community activist in Austin, Texas, was given a new quote, it was hard for her to believe.
“I go, ‘No, you’re making a mistake,’ ” she said.
Acuña had previously paid $446 a year. Under Risk Rating 2.0, she was quoted $1,893. Rate increases that large are rare. Increases are generally capped at 18% a year, but Acuña, juggling other expenses, had let her policy lapse so she was required to pay the full amount right away.
“There’s no way, no how, that I can afford it,” Acuña said.
Told of Acuña’s situation, Maurstad said the rates reflect actual risk. It’s unfortunate when people face big increases, but ensuring the financial health of the program and accurate rates is “good public policy,” he said.