The National Flood Insurance Program (NFIP) rates rose again on April 1st. A high percentage of homeowners saw price hikes as a result. The average rise for an annual premium is 6.3% and the average payment is now $878. That doesn’t include various fees, taxes and surcharges that can be tacked on depending on where you live.
Areas with higher risks, or those with second homes or homes that have experienced multiple claims will see much higher rates. Some of those will see rates that run four digits and not three.
This year isn’t bad compared to what’s coming. Rates could rise up to 25% a year until the NFIP becomes a sound taxpayer investment. That could be awhile since the NFIP is $24 billion in debt.
Worse, a whopping 43% of Americans think flooding is covered by their homeowners policy. And Aon National Flood Services VP Cynthia DiVincenti said there are 25 million homeowners living in areas where they really ought to have flood insurance.
That’s about 5x the number who are now insured.
The high costs of insurance and the debt of the NFIP is something Congress needs to — once and for all — deal with but Loretta Worters of the Insurance Information Institute (I.I.I.) says instead it keeps kicking the proverbial can down the road.
“Even when it was easier to get things done, there were all kinds of delays. The last time the NFIP ran out, it took 17 short-term extensions, four lapses and almost four years before the program was reauthorized,” she said.
Flood insurance — says Nat Wienecke of the Property Casualty Insurers Association of America (PCI) — is causing all kinds of problems that aren’t even related to flooding. “It’s terrible for consumers. You think you can close on your house … and you can’t.”
DiVincenti agrees. She said, “over 1,300 home sales were disrupted every day.”
But reforms — like the Biggert-Waters Act — have done little to fix the problem. It attempted to put flood rates on a sound actuarial basis but it caused a huge rise in rates and consumer complaints caught the ear of members of Congress who backed down and reformed the reforms.
Or back to Worters’ comment — kicked the can down the road.
Maybe that’ll change. The Trump administration — and a lot of Republicans — want to privatize flood insurance. That has some screaming. That includes Consumer Federation of America (CFA) advocate Robert Hunter. He said private insurance will just “cherry pick” the least risky properties and leave the rest to government or to no insurance availability at all.
SmarterSafer.org thinks the solution is a mix. The group is a coalition of environmental, real estate, insurance, and taxpayer groups and wants Congress to rethink how flood insurance is done. Improving flood mapping and risk analysis is a good place to start. And it wants — no surprise — more choices for consumers and that means privatizing and letting consumers choose what direction they want to go.
Source links: The New York Times, CBS News, Insurance Business America