Once Again, Flood Insurance Program to Expire Unless Congress Acts

Posted by Benji Riggins on May 3, 2012 under Flood | Be the First to Comment

Federal officials are putting fresh pressure on Congress to take action on the National Flood Insurance Program, whose authorization expires at the end of this month, one day before hurricane season begins.
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Flood insurance misconceptions: 8 facts you should know

Posted by Benji Riggins on January 20, 2012 under Flood | Be the First to Comment

If you don’t think your home is at risk for flooding, think again.

People outside of high-risk flood areas receive one-third of disaster assistance for flooding and file more than 20 percent of flood insurance claims, the National Flood Insurance Program says. Floods happen in all 50 states — not just hurricane-prone coastal areas — and are the most common natural disaster in the United States.

“Maybe if you lived on top of a mountain along the Continental Divide, maybe then you wouldn’t need flood insurance, but that’s about the only place you don’t need it,” says J. Fletcher Willey Jr., president of The Willey Agency in Nags Head, N.C.

Yet flood insurance is one of the most misunderstood types of insurance coverage. Here are eight facts to clear up some of the most common misconceptions about coverage through the National Flood Insurance Program:

1. No flood coverage under home insurance

Many people still assume standard renters and home insurance covers floods, says Larry Case, executive vice president of the Missouri Association of Insurance Agents. But you must purchase a separate flood insurance policy to protect your home and belongings from flood damage.

Most flood insurance is provided through the National Flood Insurance Program, administered by the Federal Emergency Management Agency. You can buy federal flood insurance from companies and agents certified to sell it if your community participates in the National Flood Insurance Program.

2. Flood insurance has caps

The amount of coverage you can buy through the NFIP is capped at $250,000 for a home’s structure and $100,000 for contents.

If you want more coverage, you have to buy excess flood insurance, which is sold by private insurance companies. The excess policy covers the cost of flood damage over and above the $250,000/$100,000 caps.

3. Coverage limited in basements

The distinctions can be tricky, so read the policy for details. Some structural elements in the basement are covered, such as central air conditioners, foundation walls, electrical outlets, furnaces and hot water heaters. However, carpeting and floor tile are not covered.

Some appliances in the basement are covered, such as washers and dryers, portable air conditioners and freezers. But refrigerators are not covered. Most personal belongings–including furniture, clothing and electronic equipment–are not covered when they’re in the basement.

4. Building and contents insurance required

A standard home insurance policy automatically covers personal belongings up to a certain percentage of the home’s insured value. With flood insurance, you must purchase contents coverage as well as building coverage to get both.

5. No additional living expenses provided

If your home is destroyed by fire, homeowner insurance pays for the cost to rent comparable living quarters until the house is rebuilt. But flood insurance does not include coverage for additional living expenses. You foot the bill to rent a place to live while your home is being repaired after a flood.

6. No replacement cost coverage for personal belongings

Unlike standard home insurance, which lets you purchase replacement cost coverage for personal belongings, flood insurance features only actual cash value coverage for possessions.

Replacement cost coverage reimburses you for the cost to buy a new item to replace a destroyed belonging. Actual cash value coverage takes depreciation into account and reimburses you for the value of the item at the time it was destroyed. So if a flood destroys your 3-year-old television, flood insurance reimburses you for the value of a used TV–not for the cost to buy a new one.

To qualify for replacement cost coverage to rebuild part of a destroyed building, the home must be your principal residence, and you must have insured it for at least 80 percent of the cost to rebuild or up to the $250,000 cap. Otherwise, reimbursement for rebuilding is based on the actual cash value.

7. Limited coverage on valuables

The coverage for valuables, such as furs and fine art, is limited to $2,500. Currency, precious metals and valuable papers, such as stock certificates, are not covered at all.

8. No flood coverage for hot tubs and swimming pools

Flood insurance doesn’t cover property and belongings outside the home. That includes hot tubs, swimming pools, decks, patios, fences, landscaping, walks, wells and septic systems.

Likewise, flood insurance pays for removal of debris in or on the home’s structure, but not in the yard, Willey says.

Finally, don’t wait until water is lapping at the front door to purchase a policy. Flood insurance has a 30-day waiting period from the date of purchase until the time it goes into effect. The only exceptions are if you’re buying additional insurance when renewing a policy or as a result of a map revision, or if a lender requires flood insurance for a home loan.

Read more: http://www.foxbusiness.com/personal-finance/2011/11/01/flood-insurance-misconceptions-8-facts-should-know/#ixzz1ckCWMw4n

By Barbara Marquand

Federal Flood Insurance Reauthorized Until May 2012

Posted by Benji Riggins on December 27, 2011 under Flood | Be the First to Comment

The federal flood insurance program has been extended until May 31, 2012 under another short-term consolidated appropriations bill (H.R. 2055) passed by the House and Senate and signed into law by President Obama on Dec. 23.

Had the appropriations bill not passed, the National Flood Insurance Program’s authority to issue new or renewal flood insurance policies would have expired at midnight on Dec. 23.

Insurance agents— the Independent Insurance Agents & Brokers of America (Big “I”) — applauded the reauthorization while continuing to press for a longer term authorization and program reforms.

“It is important to note that our work on this important issue is far from over and the next few months provide ample opportunity for Congress to pass long-term extension and reform legislation that provides the necessary certainty for consumers,” said Charles E. Symington Jr., Big “I” senior vice president for government affairs.

Symington noted that Congress has traditionally extended the program for five year periods in order to provide stability for the marketplace; however, for the last few years Congress had only extended the program for short periods, mostly from 30 days to six months.

“Today’s extension, although greatly appreciated, is just a temporary patch,” said John Prible, Big “I” vice president for federal government affairs.

Flood Insurance Program Extended Until Dec. 16

Posted by Benji Riggins on November 21, 2011 under Flood | Be the First to Comment

Congress has approved yet another resolution to fund parts of the federal government including the nation’s flood insurance program on a short-term basis. This time the funding runs until Dec. 16.

The Senate passed the short-term funding bill on Thursday evening after the House passed it in the afternoon.

President Obama is expected to sign the measure.

Had Congress not acted, authorization for the National Flood Insurance Program would have expired today, Nov. 18.

The insurance industry is pushing for both branches to pass a five year extension of NFIP along with reforms. Legislation to to do that has stalled. The House passed its version in July and the Senate Committee on Banking has passed a version. But the bill must still be considered by the full Senate. Then, once the Senate passes its legislation, the two branches will still have to agree on a final bill.

In 2010, the NFIP lapsed four times and flood coverage could not be purchased or renewed for a total of 53 days.

Tom Santos, vice president of federal affairs at the American Insurance Association (AIA), said what many in the insurance industry have expressed: relief that the NFIP will not lapse but disappointment that a long term extension has not been passed.

“We’re pleased the NFIP isn’t going to lapse. However, this will be the third short-term extension in as many months. More certainty is needed and as such, AIA encourages Congress to pass a long-term extension with meaningful reforms that aim to strengthen the program,” Santos said.

Down to the Wire for Federal Flood Insurance… Again

Posted by Benji Riggins on November 16, 2011 under Flood | Be the First to Comment

The nation’s flood insurance program is scheduled to expire again on Friday, Nov. 18, 2011, unless Congress takes action.

Last month, the House and Senate passed legislation that kept the federal government – and the National Flood Insurance Program – running until Nov. 18, 2011.

Since then, legislation to reform and extend the flood program for five years has stalled. The House passed its version of this legislation in July and the Senate Committee on Banking has passed a version. But the bill must still be considered by the full Senate.

Then, once the Senate passes its legislation, the two branches will still have to agree on a final bill.

The insurance industry is pushing for both branches to pass a five year extension with reforms; however another short-term funding extension for the government including the NFIP may be all that Congress will manage.

“The flood program is set to expire in less than 72 hours,” said Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America (PCI). “While PCI continues to urge a long-term reauthorization for the NFIP, our first priority is avoiding a program lapse. We urge Congress to move expeditiously to avoid a lapse in the flood insurance program.”

In 2010, the NFIP lapsed four times and flood coverage could not be purchased or renewed for a total of 53 days.

The program has more than 5.6 million policyholders.

NFIP reform has Big “I” support

Posted by Benji Riggins on April 18, 2011 under Flood | Be the First to Comment

A Republican draft bill to reform the National Flood Insurance Program has garnered praise from an insurance industry group.

Rep. Judy Biggert, chairman of the House insurance subcommittee, will present reform legislation at a hearing on Friday.

The legislation would increase rates for most properties by 20 percent per year until they reach actuarially sound levels. Property owners in areas newly deemed flood hazard zones will see their rates increase 50 percent the first year, followed by 20 percent each following year until they reach actuarially sound levels.

In addition, the draft bill offers two new coverage options: additional living expenses up to $5,000 aggregate and business interruption coverage up to $20,000 per property.

Many of the provisions of the legislation are supported by the insurance industry.

We’re very encouraged,” said Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America (the Big “I”). “It’s an excellent draft. It tackles many of the issues.”

The Big “I” plans to have Connecticut agent Spenser Houldin testify at Friday’s hearing on the NFIP reform legislation.

Flood Insurance Reform Bill Due This Week

Posted by Benji Riggins on April 6, 2011 under Flood | Be the First to Comment

A key House subcommittee plans to mark up its final version of legislation to reauthorize and reform the federal flood insurance program this Wednesday.

Rep. Judy Biggert, R-Ill., who chairs the Financial Services Subcommittee on Insurance, Housing and Community Opportunity, launched hearings on the the National Flood Insurance Program (NFIP) last month. Last Friday, Biggert unveiled a revised version of her legislation to reform the NFIP after hearing testimony from Craig Fugate, the Federal Emergency Management Agency administrator, who oversees the program.

Biggert’s bill, H.R. 1309, the Flood Insurance Reform Act of 2011, provides for a five-year reauthorization of the NFIP and includes reforms meant to improve the program’s finances, move rates towards actual costs, reduce the burden on taxpayers, and increase private sector participation in the flood insurance market.

H.R. 1309 reflects changes made to the draft that Biggert released last month. Among the changes are clarifications regarding risk mapping standards and FEMA’s authority to consider the demolition or rebuilding of certain properties as an eligible activity for mitigation assistance. Also, new language was added to the bill to clarify FEMA’s authority to utilize private reinsurance, as well as a requirement that the agency seek and report on proposals from the private market for assuming risk within the program.

The NFIP is more than $17.75 billion debt; much of the debt is attributable to the 2004 and 2005 hurricanes.

“NFIP is deeply in debt, and its current structure simply cannot provide the reliable protection that homes and businesses need without putting taxpayers at extraordinary risk,” said Biggert. “By putting the program on sound financial footing and encouraging private sector participation within the market, our bill addresses the concerns of homeowners, businesses, industry experts, and taxpayers.”

Last reformed in 2004, the program has been widely criticized for under-pricing risk and promoting development in flood-prone areas that are more suitable for conservation.

“We need to restore the financial integrity of NFIP, and that requires better flood maps, actuarially sound pricing, and direction for FEMA to better manage risk,” said Biggert.

The measure is co-sponsored by subcommittee members Maxine Waters, D-Calif., Scott Garrett, R-N.J., Robert Dold, R-Ill., Shelley Moore Capito, R–W.Va., and Steve Stivers, R-Oh.

Lawmakers hope to pass the bill before the current authorization for the program expires this September.

April 4, 2011

How to Fix Nation’s Flood Insurance Program

Posted by Benji Riggins on February 23, 2011 under Flood | Be the First to Comment

The Federal Emergency Management Agency (FEMA) is seeking a top-to-bottom review of the efforts to reform the nation’s flood insurance program. The National Association of Mutual Insurance Companies (NAMIC) has offered a set of reform proposals designed to improve the National Flood Insurance Program’s (NFIP) financial standing while ensuring protections for homeowners and businesses.

In comments submitted to the FEMA, which oversees the NFIP, NAMIC said that the existing structure provides a strong foundation on which to build the program into one that maximizes this role, is viable, and is financially sustainable. NAMIC outlined a series of steps that could be taken to improve the program, including long term reauthorization, the implementation of actuarially sound rates with direct subsidies for those unable to afford coverage, the use of updated flood zone maps and the forgiveness of the NFIP’s debts from the 2005 storm season.

The following is an edited version of NAMIC’s submission to FEMA.

Congress created the NFIP in 1968 to address the increasing costs of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. Recognizing that the private market simply could not underwrite the highly concentrated and costly risk of massive floods, the federal government stepped in to create a program to provide financial protection both to taxpayers as well as citizens in flood-prone areas. The program is designed to use the premium dollars taken in every year to pay out any flood losses incurred by policyholders. While the Standard Flood Insurance Policy offered by the NFIP is sold and administered by private insurers – “Write Your Own” (WYO) carriers – the federal government retains responsibility for underwriting losses.

Over the last 40 years, the program has been instrumental in alleviating the pain of serious financial losses brought about by flooding for millions of Americans. However, the program has not been without its challenges. Subsidized premiums have been charged on a non-actuarial basis; development has increased the number of people and property exposed to flood risk; take-up rates for those in need of coverage remains extremely low; and the recent severity of flood losses has demonstrated that the NFIP is not constructed to handle major catastrophic events. The program is approximately $20 billion in debt.

Reform, Don’t Replace the NFIP
To address the concerns with the NFIP, FEMA has launched a multi-step, comprehensive analysis of the program. In the latest phase, FEMA is considering a variety of different directions reform could go: from maintaining the status quo to abandoning the program altogether. We believe that the best, most effective and viable option is maintaining the current NFIP framework while implementing reforms that address existing weaknesses.

The presence of a federal program is just as important today as it was 40 years ago. The driving force behind the creation of the NFIP – no viable private market – remains the fundamental issue.

Privatization
Flood is a unique risk. Perhaps most importantly, it is a risk that is enormously difficult to underwrite due to adverse selection. Simply put, only those people that are at risk for flooding will purchase flood insurance, making it virtually impossible to pool risk among a large enough population for a viable and affordable insurance product. In order to underwrite a risk like this, an insurer would need to charge very high premiums and maintain significant capital reserves in case of massive flooding, when all of their policyholders would be making claims. In actuality, the only people who would be able to afford coverage would likely be those that did not need it.

The question has been asked as to whether the private insurance market is ready to handle flood risk now, but nothing about the situation has fundamentally changed and primary insurers are still unable to offer this coverage. Technically, the market is already “privatized” in that there is nothing preventing companies from currently writing flood coverage and competing with the NFIP. Almost none have elected to do so.

Price controls further diminish the opportunity for a private market for flood insurance to develop. In order to achieve a fully privatized market, companies would need to be able to charge actuarially sound, risk-based rates. However, there are two main problems with this approach. First, lawmakers and/or regulators often impose restrictions that allow high-risk property owners to pay artificially low insurance premiums, forcing lower-risk property owners to subsidize the insurance costs or creating hidden cross-subsidization. Secondly, even if rating freedom was achievable the premiums would likely be much more expensive, making affordability a major issue.

Another suggestion for solving the adverse selection problem is the mandatory purchase requirement. In other words, flood coverage would be included as a required part of every homeowner’s policy. Under this proposal, the government would be mandating that citizens purchase a product that most do not need – thereby creating a massive new cross-subsidization. This situation would benefit those who choose to live in flood-prone areas at the expense of individuals who do not. It would also do much to mask the true risks of living in certain areas and incentivize overdevelopment of environmentally sensitive coastal areas and poor land use behaviors.

The questions of how the mandatory purchase requirement or the granting of rating freedom would affect the regulation of insurance are significant. Efforts to reform the NFIP should steer clear of the political debate over state versus federal regulation so as not to hinder the prospects for meaningful reform.

Optimization
NAMIC believes that the NFIP fulfills an important role for protecting citizens from financial losses due to flood. The existing structure provides a strong foundation on which to build the program into one that maximizes this role, is viable, and is financially sustainable.

We recommend a package of key reforms that should include the following:

•Long-term Reauthorization – Repeated short-term reauthorization creates uncertainty and can lead to lapses in the program as we saw in 2010. During these lapses, companies were not permitted to write new policies, issue increased coverage on existing policies, or issue renewal policies. The NFIP should be reauthorized for an extended time period in order to give more stability to the program and consumers.
•Actuarially Sound Rates – The separation of rates from the actual costs of living in a flood-prone area represents the biggest problem with the program today. In order to avoid incentivizing citizens to move to risk-prone or environmentally fragile areas, the actual price that is charged for flood coverage must reflect the actual risk. The rates charged for flood coverage should be actuarially sound in order to get the program on solid footing.
•Outside Subsidies – As noted above, the move to actuarially sound rates is likely to be painful due to the higher premiums that will be charged. For those citizens that require it, flood vouchers might be offered – independent of the NFIP – to help mitigate the costs. Any further subsidies that the government determines are necessary must be independent and transparent.
•Updated Flood Zone Maps – Additional federal funds should be allocated to the national flood hazard mapping program. Updating and improving flood maps should be a priority within FEMA to identify communities that will benefit most from updated flood maps. Speedy adoption of updated flood maps should be encouraged so that people in flood-prone areas can get the protection they need.
•Improve Take-Up Rates – Currently only 20 percent to 30 percent of property owners exposed to flood hazards actually purchase insurance. The program needs to improve these numbers dramatically in order to stay on a stable fiscal footing. There are several possible ways to improve these take-up rates:
•Stiffer Penalties – Fines should be imposed on financial institutions that fail to require flood insurance coverage for mortgages on properties in flood-prone areas or allow those policies to lapse.
•Improved Education – The NFIP should be given additional resources and a renewed mandate to improve and expand its public education programs to ensure that more people are made aware of the program and the benefits of having flood insurance coverage to protect their properties.
•Disaster Relief Waiver – Require homeowners in flood-prone areas to sign a waiver stipulating that they forfeit their right to disaster relief in the event they choose not to purchase flood insurance.
•Debt Forgiveness – The NFIP is nearly $20 billion dollars in debt. In order to retain long-term solvency the debt must be forgiven. Currently, the NFIP pays approximately $900 million a year to the Treasury in the form of interest payments. Without eliminating the debt, the future of the program is in jeopardy.
Conclusion
The FEMA process for revaluating the NFIP has been a productive one. Considering community-based or free market solutions is a goal that NAMIC shares. However, in this particular case, what may sound good on a conceptual level may create more problems than solutions.

The NFIP is in need of significant reforms in order to continue providing flood protection to those that need it. NAMIC urges FEMA to adopt the suggestions outlined above to maintain and optimize the current structure. NAMIC believes that optimization is the best way to balance all the goals of the reform effort: fiscal soundness, affordability of insurance, adequate coverage for those at risk, floodplain management with reduction of flood hazard vulnerability, economic development, individual freedoms, and environmental concerns.

NAMIC looks forward to working with the NFIP Reform Working Group and FEMA on this very important issue.

Jimi Grande is senior vice president of federal and political affairs for NAMIC. NAMIC’s 1,400 member companies write all lines of property/casualty insurance and include small, single-state, regional, and national carriers.

Read more: http://www.insurancejournal.com/news/national/2010/12/30/116030.htm#ixzz19hNfJDSj

FEMA: More Than $1 Million Approved For North Carolina Disaster Survivors

Posted by Benji Riggins on November 2, 2010 under Flood | Be the First to Comment

RALEIGH, N.C. – Less than a week after North Carolina received a major disaster declaration for flooding from Tropical Storm Nicole, almost 1,300 people have registered with the Federal Emergency Management Agency for assistance and more than $1.3 million in federal grants has been approved to help storm survivors.

Anyone affected by the disaster in Beaufort, Bertie, Brunswick, Craven, Hertford, Jones, Onslow, Pender, Pitt and Tyrrell counties is encouraged to register with FEMA. They can do so online anytime at www.DisasterAssistance.gov or by calling 800-621-FEMA (3362) or (TTY) 800-462-7585 from 7 AM to 10 PM, seven days a week. Multilingual assistance is available at the call centers.

When registering, applicants should have the following information readily available: Current and pre-disaster address; Current telephone numbers; Social Security number; and Insurance coverage, policy number(s) and agent’s name if possible.

Once registered, people may visit a disaster recovery center for more information.

North Carolina Division of Emergency Management, FEMA and the United States Small Business Administration jointly operate disaster recovery centers where specialists are available to assist survivors with their recovery process.

At the centers, registrants may speak personally with specialists, check the status of their registration or get answers to disaster-related questions. They also can get referral information about state government and local nonprofit agencies that may have additional assistance programs.

In addition, homeowners, renters, businesses and nonprofit organizations can get information about the SBA low-interest disaster loan application as well as assistance in completing applications.

The disaster recovery centers are located at:

Beaufort County: Office Building 249 N. Market St. in Washington.

Bertie County: Council on Aging 103 W. School St. in Windsor.

Craven County: County Courthouse Old Jail/2nd Floor 411 Craven St. in New Bern.

Hertford County: County Extension Center 301 W. Tryon St. in Winton.

Onslow County: Emergency Operations Center 1180 N. Commons Drive in Jacksonville.

Tyrrell County: Tyrrell Hall 906 Highway 64 E. in Columbia.

FEMA’s mission is to support our citizens and first responders to ensure that as a nation we work together to build, sustain, and improve our capability to prepare for, protect against, respond to, recover from, and mitigate all hazards.

Disaster recovery assistance is available without regard to race, color, religion, nationality, sex, age, disability, English proficiency or economic status. If you or someone you know has been discriminated against, call FEMA toll-free at 800-621-FEMA (3362). For TTY call 800-462-7585.

FEMA’s temporary housing assistance and grants for public transportation expenses, medical and dental expenses, and funeral and burial expenses do not require individuals to apply for an SBA loan. However, applicants who receive SBA loan applications must submit them to SBA loan officers to be eligible for assistance that covers personal property, vehicle repair or replacement, and moving and storage expenses.

Reported by: FEMA

House Joins Senate in Extending Flood Insurance for 1 Year

Posted by Benji Riggins on September 24, 2010 under Flood | Be the First to Comment

The House of Representatives joined the Senate yesterday in approving a one-year reauthorization of the nation’s flood insurance program.

The measure, S. 3814, will extend the National Flood Insurance Program (NFIP) until Sept. 30, 2011. The measure now goes to President Obama for his signature.

If Congress had not acted, the program would have expired next week on Sept. 30.

The vote leaves for the future any reforms of the program, which is $18 billion in debt.

But the insurance industry welcomed the extension after several years of lapses and short term rescues. This year alone, Congress allowed the program to lapse four times. During these lapses, new flood insurance policies could not be written, and thousands of real estate closings in flood-prone regions were delayed.

“While we are pleased that Congress passed the one-year extension, there is still work to be done in the 112th Congress,” said David Sampson, president and CEO of the Property Casualty Insurers of America. “With over $18 billion in debt, the NFIP is a program that needs meaningful reform and a long-term reauthorization.”

The reauthorization will ensure that the NFIP will be there for the final two months of this year’s hurricane season and much of next year’s as well, noted Jimi Grande, senior vice president of federal and political affairs for NAMIC.

“It will not, however, fix the problems with the NFIP itself. The program is financially unsustainable and failing to address that only makes the problem worse for homeowners, insurers and the American taxpayers,” Grande said.

Blain Rethmeier, a spokesman for the American Insurance Association, expressed a similar view.

“A one year extension gives Congress the time necessary to debate the more fundamental reforms the program needs. But between now and then, homeowners living in flood-prone areas will have the stability, protection, and peace of mind to go on with their lives,” he said.

Read more: http://www.insurancejournal.com/news/national/2010/09/24/113507.htm#ixzz10SgFCVvm