Schumer Seeks Changes To National Flood Insurance Program

Sep 6, 2019

U.S. Senator Chuck Schumer was in Schenectady Friday afternoon, standing with homeowners in the Stockade neighborhood to promote of his flood insurance reform bill.

With the National Flood Insurance Program set to expire September 30th, Schumer said the bipartisan National Flood Insurance Program Reauthorization Act of 2019 would protect policyholders from rate hikes. The Democratic Senate Minority Leader was surprised to learn how high those rates are for Stockade homeowners, who have dealt with regular flooding.   "What our reforms do is as follows: One, it renews it for a minimum of five years instead of people worrying every year or every other year whether we would renew it. Second, we limit the increase that they can give any homeowner to 9 percent. So what would be the average flood insurance cost here, about $500 would you say?"

Male Bystander: "This house pays $5000."

Schumer: "In flood insurance?"

Woman "Yes."

Schumer: "Whoa! that's ... is that true of most people paying that much here?"

Neighbors: "Yes" "If you're in the flood plain."

Schumer: "Yeah, well that's what you are. OK, well anyway, it will limit the increase dramatically, but we're gonna have to... we also remain the rates and I'll bet it would affect Stockade in terms of how high flood insurance should be. I mean on Long Island, which is more flood-prone than here, the south shore of Long Island, they don't pay $5000."

Schumer added "sometimes these FEMA people can charge people whatever they think they can get away with."

Stockade homeowner Mary D'Allesando lives on Washington Avenue.  "Every spring there is a fear of flooding. We watch the ice jam, hold our breath, and hope that this time it will not happen. And now, in addition we worry about storms due to climate change. When the flooding occurs it is the lower streets of the Stockade. Some are hit more than others. After Hurricane Irene and Tropical Storm Lee in 2011, the Stockade was dramatically hit. The damage to this street and all the other low-lying streets was devastating."

Schumer added that a lapse of the flood insurance program would restrict the NFIP’s authority to borrow money from the U.S. Treasury in the event of an emergency, crippling its ability to fulfill policy obligations should a major storm spur many insurance claims.   "Our real opposition is from the administration, more than from Democrats or Republicans in the House and Senate. And so I think we have a good chance. We certainly have a good chance of renewing it, because of we didn't renew it everything would come to a standstill and property values would plummet. But I think we have a pretty good chance of getting our bill done, which would deal with this issue, and it makes them re-do the flood map and re-calibrate the flood map, so now I understand why you're paying so much because you were newly added in and when they newly added in people they made you pay the freight for a lot of people who'd been there for a long time. And our reform measure looks at that so it could actually lower rates here."

Schumer's office notes the NFIP currently covers approximately 5 million policyholders nationwide. As of this June, there were 2,292 NFIP policies in force between Schenectady, Montgomery, Albany and Rensselaer Counties and 2,250 contracts in force.

Additional material courtesy Senator Schumer's office: 

Schumer explained that an active, near-normal Atlantic hurricane season is likely upon us and that there is also a 30% chance of an above-normal season, according to NOAA’s predictions. This year’s hurricane season, which officially extends from June 1 to November 30, is expected to bring about 9 to 15 named storms, with winds of 39 mph or higher; 4 to 8 of these named storms could become hurricanes with winds of 74 mph or higher, including 2 to 4 major hurricanes. Major hurricanes include categories 3, 4, or 5; with winds of 111 mph or higher.

And some of those storms could target New York State and the Capital Region. That’s why Schumer is working with U.S. Senator Bob Menendez of New Jersey, whose state was also devastated by Superstorm Sandy, to usher this flood insurance legislation through the Senate and the full Congress as hurricane season intensifies. As touted by Menendez, the bill’s lead, the National Flood Insurance Program Reauthorization and Reform (NFIP Re) Act of 2019 includes the following highlights:

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 policies throughout the country. This untested and unknown methodology could cause a rate shock and lead to unaffordable 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 drastic 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 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.

The bipartisan bill is also cosponsored by Senators Bill Cassidy (R-La.), Cory Booker (D-N.J.), John Kennedy (R-La.), Elizabeth Warren (D-Mass.), Marco Rubio (R-Fla.), Kirsten Gillibrand (D-N.Y.), Jack Reed (D-R.I.), Chris Van Hollen (D-Md.) and Cindy Hyde-Smith (R-Miss.).

Schumer has long pushed for reforms as part of a long-term reauthorization of the flood program, 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.

Additionally, Schumer has criticized the administration’s proposed Risk Rating 2.0 plan, and has demanded that they halt the plan, which would begin to assess properties individually according to what they call ‘logical rating variables.” Schumer has said that plan could potentially impact millions of single-family policyholders of public flood insurance, and yet, Congress has not been adequately consulted.  

Schumer has long fought to protect NFIP policyholders throughout New York. In 2015, Schumer even 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 NFIP’s rules and regulations, 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.