Controlling flood insurance rates
For too many homeowners in West Virginia, flood insurance rates are rising faster than floodwaters in a rainstorm. But with new legislation that I am cosponsoring, Congress can pull them to financial safety and save them thousands of dollars on their premiums.
These new extreme flood insurance rates are the unintended consequences of changes that Congress made to the National Flood Insurance Program (NFIP) in 2012 after natural disasters like Hurricane Katrina and Superstorm Sandy left it financially under water.
The rates have risen so dramatically, in fact, that for some homeowners, their insurance payments now exceed their mortgage payments. One West Virginia family told me that their flood insurance premium is skyrocketing – from $1,000 a year to more than $10,000.
Sadly, this is just one of the many horror stories I have received from citizens across the Mountain State.
It is simply unconscionable to put homeowners through such a financial ordeal, but especially at a time when many of them are still tightening their belts in order to live within their means.
It also is unfair to change the rules in the middle of the game when homeowners have played by those rules from day one. They bought and budgeted with the expectation that their premiums would hold steady or, at least, would rise in a reasonable and manageable way.
Homeowners simply cannot afford these kinds of budget busting increases.
Moreover, such increases have prompted legitimate concerns that properties all across the country, including thousands in West Virginia alone, could simply become uninsurable or unsellable.
That would be disastrous, not only to the homeowners but to the country’s housing market at a critical time when it is still recovering.
To protect these homeowners from financial risks, I have joined 28 other Senators in cosponsoring the “Homeowners Flood Insurance Affordability Act” in this new Congress.
Not only will the Act provide much needed relief to homeowners in West Virginia and all across the country – it will also give Congress time to come up with a better fix to the financial troubles of the National Flood Insurance Program.
Make no mistake – the National Flood Insurance Program needs to be put on solid fiscal footing.
Created in 1968, the NFIP was designed to be self-sustaining and it currently collects more than $3.5 billion in annual payments. It was the federal government’s response to the fact that floods are the most common and costly natural disasters in the United States and that at the time, the private sector generally avoided flood insurance because the risks were too great.
But in recent years, claims have eclipsed premiums, most notably in 2005 when they totaled $17.7 billion, the result of the devastation caused by hurricanes Katrina, Rita and Wilma. Subsequent disasters, including Superstorm Sandy, have resulted in the NFIP going into debt by more than $25 billion.
The Biggert-Waters Flood Insurance Reform and Modernization Act that Congress passed in 2012 is supposed to make the NFIP economically sustainable. It is not supposed to impose unreasonable insurance rate increases on homeowners.
Under the 2012 reforms enacted by Congress, the Federal Emergency Management Agency, which runs the NFIP, was required to conduct an affordability study of new rates. It was due in April 2013, but FEMA said then that it needed another two years to complete it.
Meanwhile, with rate increases scheduled to go into effect before the study is completed, I felt the only reasonable response was the new legislation I am cosponsoring with 28 other Senators.
Our legislation will delay some of the new insurance rates for four years, allowing FEMA time to finish its affordability study and giving Congress time to respond with practical, commonsense solutions for the NFIP.
The delay affects three types of properties: 1) all homes and businesses that are currently “grandfathered” and receive subsidies – that is, properties that were built to code and later remapped into a higher risk area, 2) all property owners who purchased a new flood insurance policy after July 6, 2012, and 3) all properties sold after July 6, 2012.
New homeowners and business owners will continue to receive the same treatment as the previous owner unless these properties trigger another provision in Biggert-Waters such as experiencing severe repetitive loss from flooding, or are a non-primary residence (a second home), or have substantial damage from floods.
We need to find ways to pay down our debt from natural disasters and help those people affected to rebuild their homes and communities. However, we cannot raise rates to excessive levels and place that burden on the backs of honest-paying homeowners. We need to provide them relief and make sure that FEMA goes ahead with its affordability study so we know what people can and should be paying – and how quickly that should happen.
I am hopeful that the additional time will provide an opportunity to fix the NFIP so that our country is ready to face the threat of future catastrophic events and that the help will always be there for the victims of those disasters. And most importantly, I hope this legislation brings peace of mind to the thousands of affected West Virginia homeowners.
EDITOR’S NOTE: Joe Manchin is West Virginia’s junior U.S. Senator.