U.S. Senator Charles Schumer (D-NY) has charged that a plan to dramatically “reform” the National Flood Insurance Program (“NFIP”) quietly being pitched by the Federal Emergency Management Agency (“FEMA”) “could outright soak Long Islanders with increased premiums and lower property values.”
Senator Schumer explained that he wants the plan, being called “Risk Rating 2.0,” halted immediately until key questions by Congress are answered.
Senator Schumer said that it “is an outright joke for the administration to think that they can propose major reforms on how we pay for flood insurance, and how it impacts property values on Long Island, without presenting its plan and answering a litany of questions by Congress.”
Senator Schumer presented what little detail has been released about the plan and detailed how it would likely try use data and metrics in ways that could unfairly put a bullseye on Long Island. The Senator demanded the administration immediately halt this plan, come to Congress to discuss such “reforms” and answer key questions critical to Long Island homeowners and the local housing economy before it is too late.
Specifically, Schumer wants FEMA to answer at least four questions centered on costs, data gathering, affordability, and how such changes would work with broader reforms:
- How will these new rates be calculated and what is the full criteria considered as part of the calculation?
- How does FEMA define “logical rating variables” and how many private data companies will be gathering and measuring data, and who will independently peer review such data?
- Has the agency considered the systemic implications of insurance rates that could spike and the impact on homeowners and property values in vulnerable communities? If so, how would the agency possibly assist homeowners facing unaffordable premiums?
- What, if anything, will FEMA do to ensure better oversight of insurance companies participating in the NFIP and guarantee that individuals are actually receiving the flood protection from the system they've been paying into?
Senator Schumer explained that at present the entire new Risk Rating 2.0 plan that has been made available is a mere 221 words and that without a halt to these plans and without consultation from Congress, the new rates for all single-family homes will go into effect nationwide on October 1, 2020.
“I have long been pushing for the NFIP to be improved, but we cannot try to prop up the program on the backs of Long Islanders, who, under this plan, would likely become the bullseye of back-breaking costs,” Senator Schumer added.
The administration's plan would begin to assess properties individually according to what are being referred to as “logical rating variables.” Senator Schumer said that he has not even been told all the variables that make up the logical criteria. FEMA also would take into account the replacement costs of homes, which would increase premiums for higher valued properties and decrease them for lower valued ones. This plan could potentially impact millions of single-family policyholders of public flood insurance and, yet, Congress has not been consulted, Senator Schumer added.
The NFIP currently covers approximately five million policyholders nationwide. In December 2013, there were 91,558 NFIP policies in force on Long Island and following Superstorm Sandy, approximately 144,000 policyholders filed NFIP flood claims.
Senator Schumer has pushed for reforms as part of a long-term reauthorization of the NFIP, which included an NFIP that provides homeowners with flood protection for a stable and fair cost, more accurate flood maps that utilize the best technology and sound data, stricter controls placed on lawyers who seek to defend insurance companies against homeowners, and better oversight of insurance companies participating in the NFIP.
In 2015, Senator Schumer urged FEMA to scrap the decades-old write-your-own (“WYO”) insurance model from the NFIP and move forward to overhaul the process entirely so that flood insurance policyholders in New York and across the country benefited from consistent coverage and providers that were not incentivized to fight their claims. The WYO model has been in place since 1983 and allows participating insurance companies to write and service policies in their own names. While the WYOs are subject to the NFIP's rules and regulations, Senator Schumer explained that ”often times the companies are servicing flood insurance claims with the same profit-driven mentality as they would have for their other lines of business, and as a result unfairly reducing payments to homeowners.”
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].