There are two separate issues that arise when flooding hits the Farmland in the Midwest.  First, it is not uncommon that a farm family will have their home paid off, debt free, and therefore will not have the house insured for either homeowners or flood insurance.

Second is that all too often, residents of areas that might seem prime for a flood, and therefore for flood insurance, even those right behind levees drop their flood insurance policies if their bank doesn’t demand that they carry it. 

This second and more wide spread challenge often occurs after localities build levees and other mitigation projects that manage to gain FEMA certification that they can withstand a 100-year flood. Once so certified, the homes and businesses protected by the levee are not considered to be in a “mandatory” floodplain. This means that banks that have loans on homes in non-mandatory flood zones don’t have to require the homeowner to carry flood insurance.  And when the bank doesn’t require it, and the “town” is certified “compliant,” people reduce insurance costs and flood insurance is the first to go.

The cities and towns in floodplains often fight for such certifications because it is good for economic development and reduces costs for residents. Unfortunately, these certifications often rely on outdated floodplain risk assessment maps, leaving residents unaware of the true dangers they face. Such outdated floodplain maps are often based on old evaluations of levees and river conditions, misunderstanding what the certification really means, and even when all is correct at the time of the original certification, as time passes, developments move forward, no real enforcement is exercised by the community and no update assessment for changed conditions is done.

In Gulfport, Illinois, a town of 750, levees burst last Tuesday submerging the town under ten feet of water. Only 28 property owners had flood insurance. In Hull, a town of about 500 that was inundated in the 1993 flood but is now deemed protected by the Sny levee, only 44 homeowners still have flood insurance.

Nationwide, only 17 percent of people carry any flood insurance on their home. And in Cedar Rapids, less than 20 percent of the 35,000 homeowners evacuated due to last week’s record floods are believed to have flood insurance — even though most lived in a federally mandated flood zone.

Federal disaster relief, such as that ordered by President George W. Bush, typically covers such out-of-pocket costs as clean-up and temporary housing, but rarely replaces lost property.

What This Means to Agents:  PIA has, for many years, supported the ongoing modernization, updating and enforcement of: (1) FEMA’s flood maps; (2) Improved coordination among state flood plain managers (a valuable resource) and FEMA mitigation people when working with individual communities and projects; (3) Required Federal-state-community pro-rata share funding and support for infrastructure improvements to include levees, and (4) COMPLIANCE, enforcement and updates by states and communities with these mitigation requirements.

PIA has made a number of significant presentations to FEMA mitigation, state flood plain managers, state governors, state insurance departments and industry, going back before, but also as a result of the 1990’s Midwestern floods to make communities understand what they all had on the line.  Levees are the most obvious, but bridges and tunnels are in just as much risk from these events.  Our last such presentation was during the June NAIC NAT-CAT Working Group meeting.

And as we write, Members of Congress have still not adopted the National Flood Insurance Program (NFIP) bill that will authorize more reforms, provide debt forgiveness to NFIP, and continue the NFIP, currently set to expire on September 30, 2008.  Most say, Senate leader conferees will “get it done” by the wire. 

Currently, the legislation has been passed by the U.S. House and Senate and will soon head to a conference committee to work out the differences. The legislation passed by both bodies’ calls for modernization of FEMA’s flood maps and includes a new requirement that residents in areas behind levees and dams buy flood insurance.

Midwest Flood Victims Feel Misled By Feds (insurancenewsnet.com) 

Despite the Risk, Few Buy Insurance Against Floods (Chicago Tribune 6/20/08)

June 24, 2008