Reed’s Bipartisan Flood Insurance Reform Would Help Prevent Premiums from Swamping Homeowners & Businesses
Legislation extends National Flood Insurance Program for 5 yrs., institutes reforms to make it more affordable, efficient & sustainable
WASHINGTON, DC – Today, U.S. Senator Jack Reed (D-RI) joined Senators Bob Menendez (D-NJ), Bill Cassidy (R-LA), Marco Rubio (R-FL) and others in introducing the National Flood Insurance Program Reauthorization and Reform Act of 2019. The bipartisan bill would reauthorize the National Flood Insurance program for five years, implement new reforms -- including Senator Reed’s provisions to invest more in flood mitigation -- and cap premium increases each year.
The National Flood Insurance Program (NFIP) was originally established in 1968 and is the principal provider of flood insurance across the United States. Today, there are over 5 million policyholders nationwide, including about 15,000 policies in force in Rhode Island. The Federal Emergency Management Administration (FEMA), which runs the NFIP, is examining changes to the way it calculates flood insurance rates in 2020. Currently, rates are determined by a property's elevation, its location in the 100-year floodplain, and whether it has vents on the foundation.
The federal legislation authorizing NFIP expired in October of 2017. Since then, Congress has been forced to enact 12 short-term extensions for the program, as lawmakers work toward a comprehensive, longer-term solution.
The National Flood Insurance Program Reauthorization and Reform Act will help reform NFIP to make the program more affordable, efficient, fair, and solvent for policyholders and taxpayers alike. Reed’s legislation could help save middle-class families and businesses across the Ocean State from seeing their premiums jump by thousands of dollars next year.
“Every American homeowner, renter, businesses, and community is at risk of a substantial loss due to flooding. The National Flood Insurance Program provides a way to protect against such risk, but the program can be vastly improved to better protect the public,” said Sen. Reed. “This bill would provide a comprehensive, long-term reauthorization that will ensure property owners know their flood risk and have an appropriately priced but affordable way to insure against it. Most important, it includes new tools I authored to help property owners mitigate risk before a flood occurs.”
“We’ve witnessed the NFIP fail our constituents in their greatest hour of need and, after countless reauthorizations that simply kick a broken can down the road, we want real reform,” said Sen. Menendez. “With the National Flood Insurance Reauthorization and Reform Act of 2019, we can make the program more sustainable, more affordable, hold FEMA and private contractors accountable, and invest in the kind of forward-looking mitigation that reduces risk and prevents costly flooding in the first place.”
“This legislation ensures the NFIP works for the homeowners that depend on it,” said Sen. Cassidy. “The reforms in this bill are critical to any reauthorization effort to make the program sustainable and prevent families from being hit with drastic premium increases.”
Bill Summary: National Flood Insurance Program Reauthorization and Reform (NFIP Re) Act of 2019
Long-Term Certainty: Reauthorizes the NFIP for five years, providing certainty for communities.
No Steep Rate Hikes under Risk Rating 2.0: Protects policyholders from exorbitant premium hikes by capping annual increases at 9%. Currently, premiums can more than double every 4 years or less and FEMA’s new methodology called Risk Rating 2.0 will fundamentally alter premiums on every policy in the country. This untested and unknown methodology could cause a rate shock and lead to unaffordability premiums, forcing homeowners to drop coverage or lose their homes. We saw all too clearly the negative consequences of hiking premiums after the Biggert-Waters Act of 2012 caused costs to skyrocket, hurting policyholders and disrupting the real estate market. This will put guardrails on FEMA’s new rating methodology, known as Risk Rating 2.0, and safeguard policyholders from sudden rate shocks.
Affordability for Low- and Middle-Income Policyholders: Provides a comprehensive means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium causes their housing costs to exceed 30% of their Adjusted Gross Income, significantly increasing the affordability of the NFIP program.
Path to NFIP Solvency: Freezes interest payments on the NFIP debt and reinvests savings towards mitigation efforts to restore the program to solvency and reduce future borrowing
Limits on Private Insurance Company Profits: Caps Write Your Own (WYO) compensation at the rate FEMA pays to service its own policies and redirects the savings to pay for the means-tested affordability program.
Increased Cost of Compliance (ICC) Coverage: Increases the maximum limit for ICC coverage to better reflect the costs of rebuilding and implementing mitigation projects. In addition, ICC coverage eligibility is expanded in order to encourage more proactive mitigation before natural disasters strike.
Strong New Investments in Mitigation: Provides robust funding levels for cost-effective investments in mitigation, which have a large return on investment and are the most effective way to reduce flood risk.
More Accurate Mapping: Authorizes funding for Light Detection and Ranging (LiDAR) technology for more accurate mapping of flood risk across the country, reducing confusion and generating better data.
Oversight of Write Your Own (WYO) Companies: Creates new oversight measures for insurance companies and vendors, and provides FEMA with greater authority to terminate contractors that have a track record of abuse.
Claims and Appeals Process Reforms Based on Lessons from Sandy: Fundamentally reforms the claims process based on lessons learned in Superstorm Sandy and other disasters, to level the playing field for policyholders during appeal or litigation, bans aggressive legal tactics preventing homeowners from filing legitimate claims, holds FEMA to strict deadlines so that homeowners get quick and fair payments, and ends FEMA’s reliance on outside legal counsel from expensive for-profit entities.
Better Training: Provides for increased training and certification of agents and adjusters to reduce mistakes and improve the customer experience.