Hundreds of thousands of Americans have dropped their flood insurance through the National Flood Insurance Program, or NFIP, since last October, E&E News found in a review of federal data. The sharp drop in coverage comes after the Federal Emergency Management Agency revised the program’s insurance pricing system, a move intended to make premiums more accurately reflect a property’s flood risk.
When the agency reviewed the NFIP last year, it found disparities in how insurance premiums were assessed. Homes in less flood-prone areas were paying more for their premiums and bearing a higher burden of flood risk costs. The overhaul of the system was intended to address these inequities by adjusting premium rates according to the level of risk.
“[W]we have a responsibility to ensure that we have actuarially consistent, fair and equitable rates. And so that’s what’s driving the change,” NFIP senior executive David Maurstad told CNBC last year.
While this restructuring has caused some homeowners to see their insurance premiums go down, others saw their rates jump to more than $4,000 a year from just about $700, according to Jeremy Porter, chief research officer at First Street Foundation, a nonprofit research group that assesses and communicates climate risks.
E&E News found that the total number of NFIP policies fell by nearly 9 percent, from 4.96 million to 4.54 million, between the end of September 2021 and the end of June 2022.
The decline in coverage comes at a time when it’s more important than ever for people living in flood zones to buy insurance. FEMA estimates that climate change will cause the size of high-risk flood zones to increase by 55 percent along the nation’s coastlines and up to 45 percent along major river systems by the end of the century.
Sarah Pralle, an associate professor of political science at Syracuse University, said that while the preliminary numbers of dropped policies are troubling, they’re part of a broader problem that extends beyond the NFIP restructuring. Americans who live in flood-prone areas tend not to buy insurance, making premiums higher for those who do because the pool of insurance is smaller.
This problem can be addressed in part through enforcement: Although federal law requires homeowners in high-risk areas to pay down federally backed mortgages to purchase flood insurance, many choose not to, or opt out of the policy. theirs after a few years.
But the biggest problem, she believes, is rooted in FEMA’s flood maps, which depict current levels of disaster risk using data from the past, rather than projections for the future.
“You can buy a house outside the edge of a flood zone, thinking you’re safe, but you’ll have that mortgage for 30 years,” she said. “And maybe in 30 years your house will be in a flood zone.”
The solution, Pralle believes, is to adjust FEMA’s flood maps to include more people, thereby expanding the insurance pool and lowering premiums for everyone.
But requiring more people to buy flood insurance is a politically unpopular policy that risks overburdening low-income homeowners who are already struggling to pay their mortgages. Recognizing this, Pralle said an equitable national flood insurance program would provide subsidies to low-income families to encourage them to seek coverage.
Ultimately, she said, it’s in everyone’s best interest to have flood insurance. Individuals without coverage must often rely on FEMA disaster relief funds, which are typically only a few thousand dollars, compared to up to $250,000 that NFIP policies can receive for structural damage to a single home.
“If you look at the results, people with insurance do much better after disasters,” she said. The goal should be to ensure that low-income homeowners have access to those better outcomes. “Subsidizing those premiums so they have that security and don’t lose everything,” Pralle said. “I don’t think the solution is just don’t force people to buy insurance.”