A House oversight committee wants FEMA to explain the high cost of flood insurance

A House oversight committee wants FEMA to explain the high cost of flood insurance.

WASHINGTON – On Monday, the U.S. House committee looking into public corruption and fraud wanted specifics from the Federal Emergency Management Agency on the operation of its new flood insurance pricing scheme.

The House Committee on Oversight and Accountability gave FEMA until May 29 to provide any records pertaining to the system, Risk Rating 2.0, that would assist lawmakers in "understanding the premium calculations" that have resulted in rates rising, sometimes dramatically, for many of the 4.7 million Americans purchasing policies that pay for repairing water damage to individual homes and businesses. The request was made in a letter delivered Monday night to Deanne Criswell, the administrator of FEMA.

House Oversight Chair James Comer, R-Kentucky, said that homeowners, especially those who are financially challenged, need reasonably priced flood insurance coverage to guard against catastrophic financial loss should future floods occur. "The rate increase process has been anything but transparent."

The three-page letter requesting information was composed on Friday, but it wasn't finished until late Monday because other House members requested to sign it, which necessitated physically bringing the document to each office on Capitol Hill. 51 of the 435 House members, from all parties and areas of the nation, signed, including all six Louisiana congressmen.

Louisiana's congressional delegation and political leaders from both parties urged FEMA to divulge the elements that went into that calculation even before the new pricing technique was set to be implemented in October 2021. They believe Louisiana-specific characteristics, including levees defending low-lying land, were not properly taken into account.

Families in Louisiana and around the country are suffering as a result of FEMA's terrible Risk Rating 2.0, which was implemented before it was ready for use. According to Rep. Steve Scalise, the Jefferson Republican and Majority Leader of the House, some premiums in my area have jumped from hundreds to thousands of dollars. Scalise co-signed the letter and is in charge of collecting the data.

Local Louisiana authorities, notably Dwayne Bourgeois, executive director of the North Lafourche Levee District, have long expressed concern about what congressional legislators have referred to as FEMA's lack of openness. "Unfortunately, we've raised the issues and they've mostly gone unaddressed," he added. "We know there are gaps in the system FEMA is employing to determine Louisiana policyholders' rates.

After having its request for access to public documents to analyse the data turned down, St. Charles Parish this week filed a lawsuit contesting the pricing approach. According to St. Charles Parish President Matthew Jewell, "It is driving people out of their homes and they can't even explain how they've calculated these premiums."

However, the FEMA administrator in charge of the National Flood Insurance Programme stated that the organisation has been transparent about the specifics of the pricing system. "We have done a good job of providing all the information someone needs to assess the programme," David Maurstad said in his testimony on Friday.


According to the specific property's danger of flooding, Maurstad noted that only new policyholders would pay full price for flood insurance policies, often quadruple the prior rate. The cost of flood insurance can only go up annually by 18% for individuals who currently have it.

The new FEMA regulations mandate that property owners disclose to potential buyers information regarding the property's risk of flooding and the long-term insurance costs.

The goal of Risk Rating 2.0 was to make government subsidised flood insurance more comparable to a for-profit product by tying premium costs to compensation for damage.

The National Flood Insurance Programme has frequently depleted its reserves over the course of its 50-year history and depended on federal tax payers to pay for recovery expenses. The programme owes $20.5 billion in debt, with interest accruing at a rate of $1 million every day.

Congressmen from the interior of the country have long grumbled about needing to often repair seaside estates. They found it particularly infuriating because NFIP had repaired each of the approximately 350,000 properties that had been flooded more than once.

Risk Rating 2.0, according to FEMA, would make advantage of improved "technological and mapping capabilities to determine and communicate a property's full flood risk." For the majority of households and businesses in Louisiana, the pricing technique resulted in yearly policy costs that were somewhat higher or lower.

However, the premiums became so high for many people living in low-lying and flood-prone areas that they could no longer afford the insurance, and their properties began to lose value. Jim Donelon, the insurance commissioner for Louisiana, was quoted in the congressional letter as saying: "Without changes to the NFIP plan, these premium increases will cause many Louisiana policy holders - especially lower income households in the most flood-prone areas - to drop their flood insurance altogether."

The letter noted that since FEMA proceeded through with Risk Rating 2.0 premium rises, "New Jersey has likely seen approximately 12,000 policy holders drop their policies and it is estimated that 80% of policy holders in the state will see rate increases."

Although some lenders require flood insurance before lending on a property, buying flood insurance is entirely optional.

Later this year, the NFIP is up for renewal, and Congress is worried that the programme won't be able to continue due in part to higher-priced insurance under the new approach that have reportedly caused many to withdraw their policies.

The committee demanded FEMA provide documents covering a dozen factors that go into calculating rates, such as historical losses and risk exposures from 1992 to 2018; catastrophic modelling; discussions with the U.S. Army Corps of Engineers on levees; and state profiles. This was in addition to all information and communications regarding Risk Rating 2.0. The committee also asked for precise figures on how many policyholders increased their flood insurance premiums and how many former policyholders discontinued their coverage.

Although the Republican-dominated committee requested the information before Democratic President Joe Biden took office, FEMA had already started looking at the new pricing methodology. The committee began looking into the American pullout from Afghanistan and fraud in pandemic recovery expenditures, but it stopped looking into Donald Trump and the disturbance at the US Capitol on January 6.

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