Floridians looking at their flood insurance bills are shocked to see their new rates.
That's because for decades, taxpayers have subsidized the National Flood Insurance Program and now it's broke: to the tune of $24 billion — a heavy burden for a program that collects only $3.3 billion a year in premiums. Congress has a responsibility to reform this federal government program.
The problem began in 1968 when Congress created the NFIP to provide subsidized insurance to homeowners who built or bought homes in flood-prone areas across the country. By distorting the true cost of risk and making it more attractive for people to live in flood-prone areas, Congress increased both the safety risk to homeowners and financial risk to all taxpayers who are the ultimate backstop for the NFIP.
Today, NFIP is massively in debt due to the combination of these subsidized rates and the increasing frequency of severe storms like Hurricanes Katrina, Ivan and Sandy. Worse, there are serious concerns about the NFIP's ability to pay out future claims to its policyholders.
In 2012, Congress attempted to fix the problem by passing the Biggert-Waters Flood Insurance Act. Biggert-Waters ensures that the NFIP can pay claims to its policyholders by instructing FEMA to phase out subsidies by making insurance rates more actuarially sound with the risk they are covering.
Unfortunately, Biggert-Waters led to some policyholders seeing exorbitant rate increases immediately. This is a horrible situation that puts families in a financial bind and risks dampening an already fragile housing market in Florida. Congress created the problem and Congress must fix it. But the fix cannot occur overnight.
The Senate recently passed legislation that would delay the implementation of Biggert-Waters for four years. Delaying flood insurance reform will not solve the problems in a meaningful way. Congress cannot kick the can down the road: The NFIP would be at further risk of being unable to pay claims; homeowners won't be able to pay those same high rates; and home buyers looking to purchase a new home will not want to take on a policy with high flood insurance costs.
I am committed to finding a practical and more affordable long-term solution that protects Floridians. Here are some ideas:
First, we must hold FEMA accountable by ensuring that FEMA's rates are actuarially sound and that communities are easily able to challenge their flood maps.
Second, Congress should also look at targeting assistance to homeowners struggling with new rates. Policyholders must have all of the resources they need to verify accurate flood insurance rate information when renewing policies and be able to challenge FEMA's assessment of increased rates.
Third, homeowners should not be penalized for Congress' mistake. If rates do increase, the increases must be phased in gradually. A gradual, more affordable, phase-in of rates would ease homeowners' fears about being unable to pay the high rates or fears of being unable to sell their home.
Fourth, Congress should allow for consumer-driven options including monthly payments, high-deductible plans and policies that meet the individual homeowner's needs, not a one-size-fits-all government flood insurance policy. A gradual phase-in would encourage competition from the private market and allow homeowners time to shop for private insurance coverage. Private insurance companies can offer homeowners more options and more affordable policies that the government cannot. When there is more than one insurer, the consumer always benefits.
For example, a policyholder in Florida recently purchased a private flood insurance policy that was 52 percent lower than the rate FEMA was charging for the same policy and a policyholder in Pennsylvania purchased a private policy that was 80 percent lower than FEMA's.
Finally, flood insurance rates can be lowered with pre-disaster mitigation measures that make homes more resistant to flood damage. Gradually phasing in rate increases will allow homeowners time to make improvements to their home. For example, homes can be raised and basements can be floodproofed. These measures not only ease rates but also protect homes for long periods of time.
Congress should look at all of these options before delaying the necessary reforms to NFIP. Homeowners living in flood areas need more information and more options so that they can make the best decisions to save money and protect their loved ones and belongings.
By looking at more measured options, Congress can make the necessary reforms for both the homeowners who rely on the NFIP and the taxpayers who foot the program's bill.
Rep. Dennis Ross, R-Lakeland, represents the 15th Congressional District that covers part of western Polk and eastern Hillsborough counties, including Brandon and the University of South Florida. He wrote this column exclusively for the Tampa Bay Times.