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

Michael A. Smith: 409-683-5206; michael.smith@galvnews.com

(7) comments

Gary Scoggin

I've gotta disagree here, Michael. Flood insurance needs to be priced based on actual risk. Look at what windstorm rates have done since Ike. It hurts me to pay it every year, but that's part of the price I pay living in a high risk area. How long will those not living with a flood risk be content to subsidize those that do. The lesson from Irma is that flood risk is higher than we imagined. I'm sure many mortgage holders are now fully aware of these risks and will now be requiring flood insurance. The bigger question is how NFIP encourages building in high risk areas. From a public policy standpoint, we need to declare some areas as "build at your own risk" areas with the implication that there are not federally underwritten programs to backstop against catastrophic loss. (If private insurers want to step into that market, fine.)

Gary Scoggin

Harvey, not Irma. Oops.

PD Hyatt

What also should be mandated is that if you took FEMA money because you didn't carry flood insurance then that property should have to carry flood insurance from that point forward.... We were rated in a good zone, but Harvey still came up and bit us in the butt and I am thankful that we had NFIP insurance. Many in our area didn't have it and have been hit hard because of it. If everyone in this area had insurance then the cost would have been more spread out.... We have to have auto insurance to drive I don't really see much difference, just like we had to have health insurance of pay hefty fines....

Gary Scoggin

Good suggestion!

Carol Dean

I like this idea! Pure Common Sense!

Ken Hufstetler

I have carried flood insurance since the first day it became available and I have never had water in my home. But, who knows when the storm drains in my neighborhood may plug up during a storm and I end up with several feet of water.
I don't understand how FEMA works. If I am flooded FMA pays me for damages and I understand the Gov. has to subsidize my claims. If I don't have flood insurance and I am flooded FEMA will pay for damages and the Gov picks up the full cost? I think a better way is for all who live along the coast susceptible to flooding be required to have flood insurance and adjust the rates based on risk. If you are willing to self-insure and take the risk, then that is your choice. For me, I will continue paying for flood insurance and pray that I never need to file a claim.

Chuck DiFalco

Mr. Smith has a valid point. Jack up flood insurance rates, and property owners in Texas will drop out. I was never required to have flood insurance. Have never flooded. But if the feds jack up my rate from 400 something to 2000 something per year (5 fold – yes I believe the feds would do something like that) because some homes in my neighborhood flooded, I would drop insurance and put the money in the bank. After a few years I’d have a pile of emergency cash. Others would just drop and take on risk. Still others would just walk away, unable to pay insurance or sell their homes. Vacant buildings would increase. A good bit of the uninsured losses would be picked up by FEMA. All that defeats the purpose flood insurance program. Those with the power to increase flood insurance rates should take that into consideration.

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