Thousands of lower risk homeowners are effectively subsidizing flood coverage for those in higher risk areas, according to a flood map advocacy company.
West Palm Beach-based Flood Zone Correction Inc. said yesterday that low flood risk homeowners in several states contribute more in annual premium to the National Flood Insurance Program than they receive in claims payments, and called on federal lawmakers to help balance out the program.
Policyholders in parts of Florida as well as those in Georgia, Michigan, Illinois, Nebraska, Maine and Idaho continue to contribute more in annual premium payments than they receive in average annual claim payments, the company found. At the same time, homeowners in Alabama, Kentucky, Louisiana and Mississippi receive more in claims than they pay in total premiums.
“Low flood risk policyholders cannot be expected to carry the load of high flood risk policyholders, nor will they be the key to bailing out the NFIP,” said Dan Freudenthal, president of the company. “We need a program that's fair to all policyholders in all flood risk categories. If the program's to survive, it must stop subsidizing premiums of high risk policyholders. Those who are truly at high risk for flooding and file the vast majority of claims must pay full actuarial premiums.”
Due to the calm storm season of 2006, the Federal Emergency Management Agency, which runs the NFIP, believes it has enough funding to cover claims until the summer months. Congress is expected to extend the program's borrowing authority, but to attach several reforms to the extension. These would be aimed at increasing the number of policyholders in the NFIP and bringing rates closer to their actuarial level.
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