The U.S. House of Representatives’ Committee on Financial Services’ Subcommittee on Housing and Insurance addressed flood insurance reform efforts in a hearing on March 10. The hearing, “How Do We Encourage Greater Flood Insurance Coverage in America?,” examined the availability of flood insurance in communities across the country, as well as the steps needed to expand flood insurance coverage. A key portion of the hearing dealt with the National Flood Insurance Program (NFIP), a FEMA-administered insurance program that is the leading provider of flood insurance. The program currently provides coverage to approximately 4.7 million policy holders. Of the 4.5 million residential policies in the program, approximately 70% are for single-family homes, while 20% are for condominiums and multifamily buildings.
The hearing featured a panel of experts, including Patrick Small, president of DUAL Specialty Flood, who spoke on behalf of the Wholesale & Specialty Insurance Association; Christopher Hendrick, owner and principal of Heidrick & Company Insurance and Risk Management Services, who spoke on behalf of the Independent Insurance Agents and Brokers of America; Julian Enoizi, global head of public sector at Guy Carpenter; and Dr. Carlos Martin, the David M. Rubestein Fellow at the Brookings Institution and the director of the Remodeling Futures Program at Harvard University’s Joint Center for Housing Studies.
Dr. Martin is a long-time contributor to disaster recovery reform efforts undertaken by the NLIHC-led Disaster Housing Recovery Coalition (DHRC) and to NLIHC’s Disaster Recovery Research Consortium. The hearing was livestreamed and recorded.
Questions during the hearing focused on the large-scale entry of private insurers into the flood insurance market, which has not occurred for approximately 100 years. Discussion among Republican majority members focused on the feasibility of the private market taking a greater role, about which suggestion insurance industry representatives expressed interest, especially regarding their ability to provide cheaper coverage. Democratic minority members’ questions focused on the impact of flooding and flood insurance costs on households with lower incomes and whether private insurance would sufficiently ensure that these properties could be properly insured in a way that made financial sense.
The position expressed by the witnesses is best summarized by a section of Dr. Martin’s written testimony: “Diversifying the pool of insurers in this space to include private-sector providers could also be a helpful strategy to increase the number of flood policies, provided these same entities offer policies with sufficient coverage, at affordable rates, with fair and equal terms and claims processing, and with transparent disclosures to the public,” wrote Dr. Martin. “A transition from federal insurance to private flood insurance, further, does not guarantee fair pricing and treatment. Private flood insurance, as regulated by states, is subject to a range of terms. For example, policyholders’ financial capacity (e.g., income and assets) can legally be included as a factor in insurance quotes. Disparities in property insurance offerings and in the subsequent outcomes for different policyholders remains a national policy concern and will continue to be without a clear public role. These disparities will only grow as more severe flood events occur.”
Read written testimony from the hearing and watch a recording at: https://bit.ly/4216aUN