With all the heartache and overwhelming tragedy resulting from the devastating events in Texas, and the possibility of further catastrophe as the storm begins its northeastern track later this week, it is almost impossible to think the federal government will not focus political attention on the National Flood Insurance Program (NFIP).
The NFIP program is, in itself, a controversial government benefit that makes home ownership available to many in south Louisiana today, but it is already $24 million in debt. Additionally, if Congress doesn’t act within the next 33 days, it will expire. One of the big questions involves whether Congress will reform the program.
And while big corporations will probably survive the flooding and damages brought about by Harvey, millions of families could be forced into debt and bankruptcy. Quartz.com is reporting that according to data from the Insurance Information Institute, of the 1.6 million homes in Harris County, Texas, as of August 2016, 85 percent did not have flood insurance.
The National Flood Insurance Program (NFIP) is a program created by the Congress in 1968 through the National Flood Insurance Act of 1968. NFIP was originally designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.
As of April 2010, the program insured about 5.5 million homes, the majority of which were in Louisiana, Texas, and Florida. And the NFIP has gone through several revisions, the latest in 2014. Today, owners of property in flood plains frequently receive disaster aid and payment for insured losses, which in many ways negates the original intent of the NFIP.
But with the whole program being so outdated, Congress has three options – force more expensive premiums, for example, or discouraging rebuilding in high-risk areas, or merely extend the program as it is now, despite its structural problems.
Congress has so far, balked at requiring updated maps of flood zones and flood plains. Some of the data available to NFIP is decades old, and even more important, climate change has added to the problem, making storms more extensive and extreme, like Harvey.
According to CoreLogic, over half the homes in Houston are in moderate to high-risk flood areas that have not been designated a flood zone, even though they have been flooded several times in the past several years.
“There are some early indications that this is going to have an exceptionally large impact on the number of people who are totally uninsured,” says Howard Mills, the global insurance regulatory leader at consulting and accounting firm Deloitte.
FEMA director, Brock Long wants to do an overhaul on federal disaster relief. He would like to shift the costs of disaster relief away from the federal government to states, cities, and homeowners. “I don’t think the taxpayer should reward risk going forward,” he told Bloomberg.
The House Financial Services Committee has bills to extend the NFIP program for five years but also to “shrink its footprint, ramp up what policyholders pay and make it easier for private companies to compete,” Politico reports. But many coastal lawmakers are already balking at the idea of higher rates, so it is questionable what the outcome will be for NFIP.
