Many homeowners skip flood insurance despite need, federal official says

ASHEVILLE — Hurricanes Florence and Michael won’t bust the budget for the National Flood Insurance Program but they should remind people they might need flood insurance even if they don’t own a beachfront home, the head of the program said here Wednesday.

Florence left vast swaths of southeastern North Carolina underwater recently, but David Maurstad, chief executive of the NFIP, said in an interview the number of claims from the storm so far is only a little more than 14,000.

What appears to be a relatively small number given Florence’s catastrophic reach is not a product of people being reluctant to tap Uncle Sam for help, but that many whose homes or businesses are subject to flooding don’t buy the insurance.

NFIP says it had 128,350 flood insurance policies in the state as of 2016.

Maurstad, a former mayor, state legislator and lieutenant governor in Nebraska, is the deputy associate administrator for insurance and mitigation for the Federal Emergency Management Agency. He was in town to speak to a conference of flood plain managers at the Crowne Plaza Resort.

NFIP, one of the programs Maurstad runs, has been criticized for not charging property owners enough in premiums to pay its cost and for making it too easy for owners of homes likely to flood to rebuild over and over again at a significant cost to taxpayers.

Congress raised NFIP premiums in 2012 to bring them more in line with claim costs, but retreated two years later under protests from homeowners. It forgave $16 billion the program owed the federal treasury last year.

Maurstand said the program has about $5.9 billion on hand to pay claims now, more than enough to deal with the aftermath of Florence and Michael.

Critics note that the program is still more than $20 billion in debt and say the challenges it faces are only becoming worse with climate change.

The National Resources Defense Council, an environmental advocacy group, said in 2017 that FEMA spends only $1.72 to relocate people out of flood-prone areas for every $100 it pays out in claims for flood damage. It called the resulting cycle “flood, rebuild, repeat.”

Maurstad said the federal government needs to spend more on mitigation, the process of taking steps to reduce damages from future storms, and a recent legislative change will increase the funding available.

There are obstacles to excluding people from a government program, Maurstad said, but he endorsed “in concept” the idea of ending protections for properties likely to flood over and over again.

Critics say many coastal properties owners have discovered that they can file repeated flood insurance claims and thus are more likely to buy the insurance, but those living inland often leave themselves exposed without coverage.

One recent study suggested about two-thirds of people in areas that have a 1 percent chance of flooding in a given year do not have flood insurance.

Common reasons people don’t have flood insurance

Maurstad listed several reasons why people who need flood insurance don’t have it:

• They don’t recognize the risk. People sometimes have trouble understanding flood maps and may never inquire whether they have anything to worry about.

• Banks and mortgage companies don’t always require it. The law says people who take out federally-backed mortgages on properties at the highest risk of flooding must get flood insurance, but it is optional for other homes or businesses that still could be flooded. Lenders that require the insurance in those cases may find themselves at a disadvantage competing against lenders who don’t.

• “There’s a myth that the government’s going to bail you out.” People do sometimes get aid to rebuild after a hurricane strikes even if they are not insured, he said, but it is far from a certainty and typically takes much longer to come.

The individual assistance FEMA provided to people in the Houston area after it was swamped by Hurricane Harvey averaged about $6,000, he said. The average payout for flood insurance claims was $116,000.

• They think their homeowner’s insurance will cover flood damage. Almost all policies exclude claims from flooding.

• They don’t want to or feel they can’t afford to pay. A third of the properties in areas most vulnerable to flooding are owned by people with less than 85 percent of median household income.