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.