Progress on flood insurance: An editorial | NOLA.com

A five-year extension for the National Flood Insurance Program passed the House by a huge majority earlier this month, 406 to 22, and that's a strong signal that Congress wants to end the short-term extensions and lapses that have plagued the program in recent years.

That's critical for the nation's 5.6 million policyholders whose property is protected by the program, 485,000 of whom are in Louisiana. Last year alone, the program had four lapses, affecting people's ability to purchase or renew policies and, since many lenders require coverage, hampering home sales.

That instability puts people at risk and hurts the economy, and it must not continue. While the decisive action taken by the House is encouraging, the Senate has yet to act on legislation largely because it's focused on the debt ceiling. The Senate Banking Committee has been looking at draft legislation on the flood insurance program, but it's possible that nothing will happen until after the summer recess.

That would put this vital program uncomfortably close to the Sept. 30 deadline when it is due to expire again. The Senate needs to move quickly so that the program doesn't face another damaging lapse.

The House, which passed the Flood Insurance Reform Act of 2011 on July 12, deserves credit for approving legislation that not only extends the program but also provides reforms to ensure that it can be fiscally viable. The House also soundly defeated an amendment by Rep. Candice Miller, a Michigan Republican, to eliminate the program completely. She argued that government shouldn't be in the flood insurance business and has handled it poorly.

But the program was created in 1968 specifically because of reluctance on the part of the private insurance market. The House legislation does call for FEMA, which administers the program, to study increased involvement by private insurers, and that's a good step.

The House bill would phase out subsidies for commercial properties, second homes and vacation homes, homes sold to new owners and homes that have been substantially damaged or improved. It also moves toward premiums based on risk.

That needs to happen. The flood insurance program is $18 billion in debt, largely because of claims paid for Hurricanes Katrina and Rita. A Government Accountability Office report found that premiums, which average $600 per year, cover only 40 to 45 percent of the full amount.

But Congress needs to be careful not to raise rates so quickly or steeply that property owners will be unable to pay them. The House bill provides a five- to six-year phase-in of higher premiums for high-risk properties, those in the 100-year floodplain. The Senate's draft legislation provides a two-year phase-in.

Sens. David Vitter and Jon Tester, a Montana Democrat, wrote a letter raising concerns about the Senate's time frame. "We share the concerns of the Government Accountability Office. . . that steep increases could reduce participation in the National Flood Insurance Program and increase taxpayer costs for post disaster assistance to property owners who no longer have insurance,'' they wrote.

That's a valid concern, and it's important that the final bill takes people's ability to absorb increases into account.

Both the House bill and the Senate draft legislation would allow policyholders to pay their flood insurance premiums in installments, and that's a smart change that should encourage people to participate by making the purchase of flood insurance more manageable.

Increasing participation in the program is another way to make it more financially healthy. The Senate's draft legislation calls for requiring properties in "residual risk areas,'' those protected by a flood control structure, to purchase flood insurance, with the cost of the premium to reflect the level of protection provided.

The Senate version also addresses property owners who live in a 500-year floodplain -- while they would not be required to buy flood insurance, they would have to be given notice when they are mapped into such an area, and lenders would have to give notice to people buying property so designated. That's another step that could encourage broader participation.

The Senate draft doesn't include coverage for business interruption and living expenses result from a major flood or an increase in maximum coverage levels tied to inflation. The House bill does, and those are needed provisions.

For metro New Orleans residents, it's critical for the flood insurance program to take into account improvements that have been made to our flood protection system in recent years and not to penalize property owners who suffered flooding because of the failure of the federally built levees and floodwalls.

The House bill says communities that are making adequate progress at reconstruction to improvement to the 100-year level will be eligible for the flood insurance rates that would apply if that work were completed. Those that are restoring flood protection that was previously accredited at the 100-year level but that no longer provides that level of protection would also be given consideration.

Louisianians understand how critical flood insurance is. This state ranks third in the country for the number of policies, behind the much larger states of Florida and Texas. The fact that so many people had flood insurance was crucial in recovering from Hurricanes Katrina and Rita.

That protection is no less important now, and not just for this state. After this spring's record rainfalls and flooding, it's clearer than ever that the National Flood Insurance Program is necessary. That's why Congress needs to ensure its future.

Source: http://www.nola.com/opinions/index.ssf/2011/07/progress_on_flood_insurance_an.html

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