Flood insurance policyholders may have noticed a rise in their bills lately. In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act. This act removed federal subsidies for individuals with a high risk of experiencing flooding. This act was passed in part due to the large amounts of compensation required after Hurricanes Sandy and Katrina. Despite accusations of underpaying victims, FEMA was left with $23 billion of debt after compensating victims. FEMA is still over $20 billion in debt to the State Treasury. Removing subsidies for certain property owners is meant to help FEMA reduce its debt and be of further assistance to future victims.
The Flood Insurance Affordability Act of 2014 ensured that policy owners did not experience a sudden, large hike. It decreed that policy owners would experience a 25% increase yearly until they reach their full-risk rate. Although this change makes the rate increases less steep, many homeowners will still be facing much higher rates. This increase is on top of a new surcharge of either $25 or $250.
Many people worry that these changes will disproportionately affect low-income households. An increase in insurance rates for fixed-income families may result in many choosing to forgo their insurance. Areas already affected by Sandy will see even larger increases, which will likely impact the lower income neighborhoods in Brooklyn, Staten Island and other New York and New Jersey areas.
The rising tides of climate change mean that these changes are necessary despite the possibility of making insurance unaffordable. As sea levels rise, living along the coast will become more and more untenable. Risk of flooding and damage will increase as the height of the ocean does. Many climate change scientists suggest that it is time to begin evacuating these areas for safer, less flood-prone sections of the country. However, convincing people, especially low-income families, to abandon their homes for a new area will be very difficult. It will also be difficult to convince people to continue to pay flood insurance if they will have to leave their homes in the future. The future of flood insurance is sure to see many changes and many increases in rates despite these difficulties.