U.S. Rep. Blaine Luetkemeyer (R-MO) introduced legislation last week that would require the Federal Emergency Management Agency to look at properties individually and incorporate a structure’s actual replacement cost in National Flood Insurance Program policies.
Currently, FEMA uses an average replacement cost calculation instead of a property-specific one, Luetkemeyer explained.
“The current National Flood Insurance Program (NFIP) fails to do what private insurance policies do: price for risk,” Luetkemeyer said. “Instead, the NFIP relies on a pricing system in which policyholders in less expensive homes subsidize those in more expensive ones. Insurance policies from private carriers take into account for pricing and underwriting purposes the cost to completely replace a structure.”
Luetkemeyer’s bill would ensure that FEMA would use a property-by-property approach when pricing for premiums. This would help to end the subsidization by average homeowners of wealthier homeowners, he said.
“This legislation is the next step in getting the federal government to adhere to policies and procedures that have been in place in the private sector for decades,” Luetkemeyer said. “This legislation combined with my recently introduced Taxpayer Exposure Mitigation Act, which takes the first steps in reforming the NFIP by returning power to homeowners and local communities, will help lead our country to a more fair and equitable flood insurance program.”
The Taxpayer Exposure Mitigation Act allows for community involvement in mapping, requires FEMA to purchase reinsurance or some capital market alternative to protect taxpayers from footing the bill for future losses, and permits commercial properties to opt-out of the mandatory purchase requirement, allowing for businesses to more easily purchase private flood coverage.