Flood insurance is not always the natural-disaster answer we need

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Flood insurance is complex, politicized and not always the calm after the storm it’s supposed to be

A big chunk of Florida is underwater following Hurricane Ian. It’s not the first time and, as climate change increases the risk of extreme weather, it certainly won’t be the last.

As Floridians quite literally wade through their houses and businesses, trying to recover from “24 hours of rainfall, 24 hours of winds pushing the water,” as National Weather Service Director Ken Graham said on Wednesday, the next big question is: What will insurance cover?

It seems like a straightforward situation. Get flood insurance. Hurricane happens. Get insurance money to rebuild. But it’s unfortunately not. And the majority of people in Hurricane Ian’s path did not have it. Only 18.5 percent of homes in counties ordered to evacuate during Ian have insurance through the National Flood Insurance Program (NFIP) — the insurer of last resort for homes at highest risk — and just 9.4 percent of homes outside the government-designated flood plain have private flood insurance, reports the New York Times.

Why? Flood insurance is complex and politicized, and it doesn’t always offer the best outcome for those that buy it, said Eric Gesick, a visiting scholar at the University of Minnesota’s Institute on the Environment and co-author of multiple reports on federal disaster policies and climate change.

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Gesick gave Grid a quick rundown of how flood insurance works through three lenses: business, politics and demographics.

Types of flood insurance: Public vs. private

There are two types of flood insurance: private and public. Public flood insurance is provided by the NFIP and comprises 90 percent of all residential flood insurance in the U.S. Those who live in high-risk flood areas, as designated by FEMA, are eligible for NFIP coverage. Those who live outside these areas have to settle for private flood insurance, which tends to be more expensive. Insurance companies have more wiggle room than the federal government to raise premiums, said Gesick.

Business: A highly concentrated, expensive system

Flood insurance is harder for insurers to price compared to, say, car insurance. A car accident is more of a random event than flooding for people who live in flood zones (the main customers for flood insurance).

“You really only want insurance for those losses that are truly unexpected, right? That’s what makes it affordable,” Gesick said. “If you know you’re going to have a loss, it’s just basically a prepaid expense.”

And these risks are increasing as extreme weather events are made more volatile due to climate change, affecting entire communities — hundreds to potentially millions of adjacent properties. When disaster strikes, that means insurers face paying large numbers of claims at once. To cope, companies often jack up their premiums, pricing many people out, said Gesick.

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It is likely (but not guaranteed) that Floridians’ insurance rates go up after Hurricane Ian, said Gesick, for homeowners with either private or public flood insurance.

Politics: For policymakers, it’s easier to be reactive

Republican Florida Gov. Ron DeSantis said on Wednesday that it could be a challenge for Floridians without flood insurance to quickly recover from Hurricane Ian. But the governor has been criticized in the past for not pushing for flood insurance to be part of the state’s homeowner’s insurance package.

Generally, policymakers choose to react to flooding, rather than build up resilience — creating higher-standard municipal codes, and flood- and wind-resistance for buildings.

Gesick said this doesn’t make sense financially, because it is actually more cost-effective to invest in resilience rather than cleanup and recovery.

But he’s not confident that the current thinking will change. “It would probably take a really big disaster, probably to the tune of $100 billion-plus,” to shift the collective thinking to resilience,” said Gesick.

Part of the reason, he said, is that if resilience is prioritized, then policymakers will be held more accountable for every aspect of prevention and preparation.

Demographics and infrastructure: More people are moving to, and building in, areas that are exposed to flood risk.

A large chunk of the increased losses and fragility — due to natural disasters driven by climate change — are because “the real estate, economic engine” keeps churning in areas like South Florida, Gesick said.

Americans are flocking to Florida at a higher rate than any other state, and the average cost of a home in the Sunshine State (lower housing costs and income tax). And roughly 16 million people — three-quarters of the state — live in flooding-vulnerable coastal counties, where most of the state’s current construction is taking place.

As development continues to rise to meet the transplants, FEMA-designated flood zones aren’t the only communities at risk. Adjacent communities not in the danger zone are being flooded at higher rates, compounding the rise in prices and destroying homes that owners didn’t think needed protecting.

“As building, planning and development happen, the local topography changes,” Gesick said. “You pave over a lot of things that used to absorb water, and now that water is running around.”


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Not only are residents contending with flooding from tropical storms and hurricanes, but also from runoff during big rainstorms, which aren’t necessarily associated with climate change. It’s no longer the black and white situation, Gesick said, of “if you’re in a flood zone or you’re not in a flood zone.”

Thanks to Lillian Barkley for copy editing this article.