Insurance premiums would be raised for homeowners in flood-prone areas who refuse to relocate or floodproof their homes under legislation that advanced toward a Senate vote this week.
The bill, which has cleared the Senate Banking Committee on a voice vote, extends for five years the life of the National Flood Insurance Program, which was set up in 1968 to help people in vulnerable areas get insurance coverage and covers some 4.4 million homes. The panel’s action sent the legislation, which was cosponsored by Sen. Chuck Hagel, R-Neb., to the full Senate.
A similar version sponsored by Rep. Doug Bereuter, R-Neb., passed the House, 352-67, in November.
Repeat flood victims who rebuild their property in the same flood-prone areas cost the federal government an estimated $200 million a year.
The bills authorize states and localities to present mitigation offers to policyholders with a record of repeated losses, and approve the spending of $200 million over five years to help pay for the program. Mitigation would include such measures as elevation, relocation, demolition and floodproofing.
Policyholders who reject the mitigation offer would be charged standard actuarial insurance rates, based on risk, for severe repetitive loss properties. One study found that current participants in the subsidized flood insurance program pay only about 38 percent of actuarial risk rates.
“This is an important piece of legislation that will go a long way in bringing the flood insurance fund toward financial soundness while protecting existing property owners,” Sen. Richard Shelby, R-Ala., the banking panel’s chairman, said before the vote.
The bill’s chief sponsor, Sen. Jim Bunning, R-Ky., said it would save taxpayers money by reducing the number of homeowners with repetitive losses.
The House and Senate versions, which differ in how they define “severe repetitive loss properties,” must be reconciled before final legislation can be sent to President Bush.
Assuming that a homeowner pays $300 a year for flood insurance, under the new program his insurance premiums would jump 50 percent, to $450, the first time he failed to cooperate with a mitigation offer and another 50 percent on his next claim. The actuarial risk rate for that home might be $3,400 a year.
The government would pay 90 percent of floodproofing costs under the plan, and the property owner 10 percent.
The current flood insurance program, which is managed by the Federal Emergency Management Agency, covers some 20,000 communities across the country. Communities that participate must regulate new construction with stricter building codes and take other steps to reduce losses from future floods.
The Senate bill is S. 2238; the House bill is H.R. 253
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