A federal study recommending an overhaul of flood insurance rates could lead to an increase in premiums for more than 16,000 Oklahomans. The study by the U.S. Government Accountability Office was released this week. It stems from concerns about the financial stability of the National Flood Insurance Program that, after Hurricane Katrina, was left with a $17.4 billion debt. The report takes aim at the Federal Emergency Management Agency, the organization that calculates the rates for flood insurance in the U.S. While most of the $17.4 billion overage was caused by major hurricanes on the Gulf Coast, Oklahoma also has contributed to the program’s deficit.
Exceeding premiumsIn an analysis of claims from 1978 to 2007, Oklahoma has had seven years where flood claims exceeded premiums paid by property owners. During that period, Oklahomans collected $25.6 million more than they paid for flood insurance. Brian Walter of Kingfisher said higher rates for flood insurance could force out some small business owners. Walter, owner of Walter Building Center in Kingfisher, said he and others who have battled Kingfisher’s flooding are required by mortgage companies to have the specialty insurance. "If rates are too high, people simply can’t afford it,” Walter said. "They’ll either have to change their business model or pack up.” State Insurance Commissioner Kim Holland said there are only two options to offset the loss: Either the U.S. Treasury will have to subsidize it or rates will increase. She said that because of the country’s economic crisis a portion of the loss is likely to be passed to consumers.
New policies comingButch Kinerney, spokesman for the National Flood Insurance Program, said consumers shouldn’t see a dramatic rate change for the next two years. After that, it’s anybody’s guess. Kinerney said the program is expected to undergo significant changes in the next year, including changing the rate structure, implementing a tax credit program and creating a catastrophic insurance pool to act as a safety net for large-scale disasters.
AT A GLANCEWhat the flood study found
• The Federal Emergency Management Agency’s method for setting rates may not ensure those rates accurately reflect the risk of flood damage.
• The data used by FEMA to define flood probabilities is outdated and inaccurate.
• Nationwide, insured properties do not generate sufficient premiums to cover flood losses in recent years.
Did you know?
• There is no shopping around for lower flood insurance rates.
• All policies are derived from the National Flood Insurance Program, which spreads the risk among the 50 states.
• There are 16,289 flood insurance policies in Oklahoma with $2.3 billion in coverage.
• Oklahoma had a 7 percent growth in policies in the last year.
• Since 1978, 9,871 losses in Oklahoma have been paid totaling $136.6 million.
• About one-fourth of those policies were paid in the past year.
• There are 680 policy holders with repeat claims; of those, 117 had four or more losses.
• There are 126 properties statewide that the National Flood Insurance Program is trying to buy or elevate out of a flood zone.
• At floodsmart.gov property owners can get a cost estimate for flood insurance. Source: National Flood Insurance Program
ONLINE"¥ Read For the GAO report about FEMA flood insurance, look for "Today’s Paper.” www.NewsOK.com