An important lesson of Hurricane Harvey is that flooding and flood insurance are not problems exclusive to areas right along the coast.
That’s not news, of course, but debate about how to correct some serious and worsening problems in the National Flood Insurance Program has tended recently to frame the issue as if it were nothing inland dwellers or their elected leaders need to worry about or be involved in.
It’s good to remember that frequent, extreme flooding along the Mississippi River was among the forces that drove creation of the program in the first place.
It’s especially important for elected leaders and flood insurance premium payers to remember that as debate about how to reform the program inevitably heats up after an especially destructive hurricane season.
There’s little doubt the program needs reform.
The flood insurance program director, Roy Wright, recently estimated Hurricane Harvey would cost the federal program $11 billion. He estimated costs to the program from Irma would be at least $9 billion.
The program already was $25 billion in debt to the U.S. Treasury before Harvey and Irma, had only $1.5 billion on hand and was about to reach its $30.4 billion borrowing limit.
The program was set to expire at the end of September, but Congress voted to extend it by three months. That means as serious discussion about reform should be happening now.
One of the first things that usually comes up when lawmakers start talking about reforming the national flood program is increasing premium rates to better reflect actual risks. But there are things lawmakers should deal with before they start talking about rate increases.
The most important of those is the fact only about half the properties that should be covered by flood insurance are covered. That’s probably a best-case estimate.
Low participation consolidates, rather than spreads, the risk and results in the program going bankrupt.
The program insures about 5 million properties, but Wright estimated at least 10 million residential structures across the country need flood insurance.
Meanwhile, a 2006 study by the American Institutes of Research estimated that rules mandating flood coverage were not being very well enforced. The report estimated compliance rates to be highest in the West and South — 80 percent to 90 percent — and lowest in the Northeast and Midwest — 45 percent to 50 percent.
The problem is apparent in Texas, as well. About 57 percent of homes in Galveston County were covered by flood insurance when Harvey struck, according to the program. That rate is an anomaly, however.
The average among counties in the disaster area declared after Harvey was 20 percent. The rate of coverage even among counties right along the coast was generally less than 35 percent; it was less than 1 percent in some South Texas counties. The rate in Harris County, where highly developed Houston floods often and badly, was a dismal 24 percent.
The last attempt at reform resulted in the Biggert-Waters Flood Insurance Reform Act of 2012, which relied on premium rate increases — to better reflect actual risk — and sought to phase out subsidies granted to some policyholders.
The main result of the law was a 10 percent drop in the number of policies, which, of course, increased the amount of uninsured property sitting around in flood zones waiting to be flooded.
Congress in 2014 voted to reform the reforms.
Before Congress starts talking about increasing premium rates among people who have dutifully been paying for flood insurance, it should talk about reducing the rate of property owners who have not been paying for it at all.
• Michael A. Smith