Senator John Kennedy (R-La.) took a leading role in advocating for reforms to the National Flood Insurance Program (NFIP) during a hearing on Thursday, accusing the Federal Emergency Management Agency (FEMA) of providing inaccurate information to homeowners regarding their insurance rates.
The FEMA-administered program offers flood insurance to property owners, renters, and businesses. Unless lawmakers move to reauthorize, the program is slated to expire on February 2, 2024.
During a Senate Committee on Banking, Housing, and Urban Affairs hearing, Senator Kennedy argued that the NFIP requires restructuring to make it appear as if “somebody designed it on purpose.”
In September, FEMA announced a premium decrease for over 1 million policyholders upon renewal, out of a total of approximately 5 million policyholders. However, Senator Kennedy contested this claim, stating he had not encountered anyone who experienced a rate reduction.
Kennedy asserted, “This is just an excuse to raise premiums, and they don’t care. The whole purpose of the National Flood Insurance Program was to provide a product that people can afford.” He highlighted instances in Louisiana where premiums increased by up to five times.
Committee members have introduced legislation proposing reforms to the program, including capping rate increases at 9 percent, opposed to the current 18 percent limit for most policyholders. Senator Bob Menendez (D-N.J.), a bill sponsor, emphasized the cap as essential to prevent policyholders from being priced out.
Menendez argued that making insurance more affordable would expand the program’s accessibility, widen the pool, distribute the risk, and reduce costs.
The National Flood Insurance Program Reform Act also recommends vouchers for low- and middle-class families if premiums become prohibitively high, increased oversight for insurance companies, and enhanced efforts to identify and mitigate flood risks.
Menendez stated, “If we know right now which homes are most at risk, we shouldn’t wait until the flood to step in and help.” He highlighted the cost-benefit aspect, indicating that for every dollar invested in mitigation, the federal government saves $7 in disaster relief payments.
Michael Hector, President and CEO of Greater New Orleans Inc., informed senators that while the NFIP is costly, estimated at $36 million over recent years, FEMA asserted it saved approximately $120 billion in losses, resulting in a net benefit of $85 billion.
Hector stressed the urgency of reform and reauthorization, cautioning that a lapse in the program could significantly destabilize the national housing market and harm homeowners. “The reality is that the NFIP program is about allowing the working coast and rivering parts of America to keep working,” he concluded.
