tag:theconversation.com,2011:/us/topics/flood-insurance-17494/articlesFlood Insurance – The Conversation2022-10-05T12:20:39Ztag:theconversation.com,2011:article/1918602022-10-05T12:20:39Z2022-10-05T12:20:39ZThe big reason Florida insurance companies are failing isn’t just hurricane risk – it’s fraud and lawsuits<figure><img src="https://images.theconversation.com/files/488196/original/file-20221004-13-1curje.jpg?ixlib=rb-1.1.0&rect=0%2C40%2C5472%2C3596&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Roofs are an entry point for fraud after storms.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/in-this-aerial-view-a-neighborhood-flooded-by-the-rising-news-photo/1429416062?phrase=hurricane%20ian&adppopup=true">Win McNamee/Getty Images</a></span></figcaption></figure><p><em>Hurricane Ian’s widespread damage is another disaster for Florida’s already shaky insurance industry. Even though home insurance rates in Florida are <a href="https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322">nearly triple the national average</a>, insurers have been losing money. <a href="https://www.cbsnews.com/miami/news/sixth-florida-property-insurer-declared-insolvent/">Six have failed since January 2022</a>. Now, insured losses from Ian are estimated to <a href="https://www.verisk.com/newsroom/verisk-estimates-industry-insured-losses-for-hurricane-ian/">exceed US$40 billion</a></em> </p>
<p><em>Hurricane risk might seem like the obvious problem, but there is a more insidious driver in this financial train wreck.</em> </p>
<p><em>Finance professor <a href="https://scholar.google.com/citations?user=YbDpsW4AAAAJ&hl=en">Shahid Hamid</a>, who directs the Laboratory for Insurance at Florida International University, explained how Florida’s insurance market got this bad – and how the state’s insurer of last resort, <a href="https://www.citizensfla.com/about-us">Citizens Property Insurance</a>, now carrying more than 1 million policies, can weather the storm.</em></p>
<h2>What’s making it so hard for Florida insurers to survive?</h2>
<p>Florida’s insurance rates have <a href="https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322">almost doubled in the past five years</a>, yet insurance companies are still losing money for three main reasons.</p>
<p>One is the rising hurricane risk. Hurricanes Matthew (2016), Irma (2017) and Michael (2018) were all destructive. But a lot of Florida’s hurricane damage is from water, which is covered by the <a href="https://www.fema.gov/flood-insurance">National Flood Insurance Program</a>, rather than by private property insurance.</p>
<p>Another reason is that reinsurance pricing is going up – that’s insurance for insurance companies to help when claims spike.</p>
<p>But the biggest single reason is the “<a href="https://www.namic.org/issues/assignment-of-benefits">assignment of benefits</a>” problem, involving contractors after a storm. It’s partly <a href="https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322">fraud</a> and partly taking advantage of loose regulation and court decisions that have affected insurance companies.</p>
<p>It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.</p>
<p>If the insurance company determines the damage wasn’t actually covered, the contractor sues.</p>
<p>So insurance companies are stuck either fighting the lawsuit or settling. Either way, it’s costly.</p>
<p>Other lawsuits may involve homeowners who don’t have flood insurance. Only <a href="https://www.iii.org/insuranceindustryblog/fraud-litigation-push-florida-insurance-market-to-brink-of-collapse/">about 14%</a> of Florida homeowners pay for flood insurance, which is mostly available through the federal National Flood Insurance Program. Some without flood insurance will file damage claims with their property insurance company, arguing that wind caused the problem.</p>
<h2>How widespread of a problem are these lawsuits?</h2>
<p>Overall, the numbers are pretty striking.</p>
<p>About 9% of homeowner property claims nationwide are filed in Florida, yet <a href="https://www.iii.org/sites/default/files/docs/pdf/triple-i_trends_and_insights_florida_issues_brief_08082022.pdf">79% of lawsuits</a> related to property claims are filed there.</p>
<p>The legal cost in 2019 was <a href="https://floir.com/docs-sf/default-source/property-and-casualty/stability-unit-reports/july-2022-isu-report.pdf?sfvrsn=34f77ed6_2">over $3 billion</a> for insurance companies just fighting these lawsuits, and that’s all going to be passed on to homeowners in higher costs.</p>
<p>Insurance companies had a more than <a href="https://floir.com/docs-sf/default-source/property-and-casualty/stability-unit-reports/july-2022-isu-report.pdf?sfvrsn=34f77ed6_2">$1 billion underwriting loss</a> in 2020 and again in 2021. Even with premiums going up so much, they’re still losing money in Florida because of this. And that’s part of the reason so many companies are deciding to leave.</p>
<p><iframe id="f8AH6" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/f8AH6/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Assignment of benefits is likely more prevalent in Florida than most other states because there is more opportunity from all the roof damage from hurricanes. The state’s regulation is also relatively weak. This may eventually be fixed by the legislature, but that takes time and groups are lobbying against change. It took a long time to pass a law saying the <a href="https://www.jdsupra.com/legalnews/florida-lawmakers-to-reconvene-may-23-4203530/">attorney fee has to be capped</a>.</p>
<h2>How bad is the situation for insurers?</h2>
<p>We’ve seen about a dozen companies <a href="https://www.myfloridacfo.com/division/receiver/companies">be declared insolvent</a> or leave since early 2020. At least <a href="https://www.cbsnews.com/miami/news/sixth-florida-property-insurer-declared-insolvent/">six dropped out</a> this year alone.</p>
<p>Thirty more are on the Florida Office of Insurance Regulation’s watch list. About 17 of those are likely to be or have been downgraded from A rating, meaning they’re no longer considered to be in good financial health.</p>
<figure class="align-center ">
<img alt="Chart show increasing losses for Florida's domestic property insurers in the past five years" src="https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=665&fit=crop&dpr=1 600w, https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=665&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=665&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=836&fit=crop&dpr=1 754w, https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=836&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/488194/original/file-20221004-15-q3cyfh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=836&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://floir.com/docs-sf/default-source/property-and-casualty/stability-unit-reports/july-2022-isu-report.pdf?sfvrsn=34f77ed6_2">Based on a Florida Office of Insurance Regulation chart</a></span>
</figcaption>
</figure>
<p>The ratings downgrades have consequences for the real estate market. To get a loan from the federal mortgage lenders <a href="https://www.freddiemac.com/about">Freddie Mac</a> and <a href="https://www.fanniemae.com/about-us">Fannie Mae</a>, you have to have insurance. But if an insurance company is downgraded to below A, Freddie Mac and Fannie Mae won’t accept it. Florida established a <a href="https://www.orlandosentinel.com/business/real-estate/os-ne-2billion-insurance-bailout-rate-reductions-20220801-j63qsirr2rcknfpixgnik5avwq-story.html">$2 billion reinsurance fund</a> in May 2022 that can help smaller insurance companies in situations like this. If they get downgraded, the reinsurance can act like co-signing the loan so the mortgage lenders will accept it.</p>
<p>But it’s a very fragile market.</p>
<p>Ian could be one of the costliest hurricanes in Florida history. I’ve seen estimates of <a href="https://www.verisk.com/newsroom/verisk-estimates-industry-insured-losses-for-hurricane-ian/">$40 billion to $60 billion in losses</a>. I wouldn’t be surprised if some of those companies on the watch list leave after this storm. That will put more pressure on <a href="https://www.citizensfla.com/who-we-are">Citizens Property Insurance</a>, the state’s insurer of last resort.</p>
<h2>Some headlines suggest that Florida’s insurer of last resort is also in trouble. Is it really at risk, and what would that mean for residents?</h2>
<p>Citizens is not facing collapse, per se. The problem with Citizens is that its <a href="https://www.citizensfla.com/documents/20702/93160/20211231+Market+Share+Report.pdf/847f983a-24ca-b125-8dd8-8841796bb60b?t=1659652981930">policy numbers typically swell after a crisis</a> because as other insurers go out of business, their policies shift to Citizens. It sells off those policies to smaller companies, then another crisis comes along and its policy numbers rise again.</p>
<p>Three years ago, Citizens had <a href="https://www.citizensfla.com/documents/20702/93160/20211231+Market+Share+Report.pdf/847f983a-24ca-b125-8dd8-8841796bb60b?t=1659652981930">half a million policies</a>. Now, it has <a href="https://www.citizensfla.com/-/20220831-policies-in-force">twice that</a>. All these insurance companies that left in the last two years, their policies have been migrated to Citizens.</p>
<p>Ian will be costly, but Citizens is flush with cash right now because it had a lot of premium increases and <a href="https://www.citizensfla.com/documents/20702/24492596/Q2+2022+Quarter+Statement.pdf/efb1ce8a-30f4-3367-623d-3c44f393f78c?t=1662043955420">built up its reserves</a>.</p>
<figure class="align-center ">
<img alt="A man stands besides a leaning house with debris from Hurricane Ian." src="https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/488195/original/file-20221004-21-akth15.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Hurricane damage is more obvious in some homes than others.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/man-stands-in-front-of-his-destroyed-house-in-the-aftermath-news-photo/1243707830">Ricardo Arduengo / AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>Citizens also has a lot of backstops.</p>
<p>It has the <a href="https://www.sbafla.com/fhcf/">Florida Hurricane Catastrophe Fund,</a> established in the 1990s after Hurricane Andrew. It’s like reinsurance, but it’s tax-exempt so it can build reserves faster. Once a trigger is reached, Citizens can go to the catastrophe fund and get reimbursed.</p>
<p>More importantly, if Citizens runs out of money, it has the authority to impose a surcharge on everyone’s policies – not just its own policies, but insurance policies across Florida. It can also impose surcharges on some other types of insurance, such as life insurance and auto insurance. After Hurricane Wilma in 2005, Citizens imposed <a href="https://www.theledger.com/story/news/2014/09/25/citizens-property-insurance-oks-early-end-to-surcharge/26990790007/">a 1% surcharge on all homeowner policies</a>.</p>
<p>Those surcharges can bail Citizens out to some degree. But if payouts are in the tens of billions of dollars in losses, it will probably also get a bailout from the state.</p>
<p>So, I’m not as worried for Citizens. Homeowners will need help, though, especially if they’re uninsured. I expect Congress will approve some special funding, as it did in the past for hurricanes like <a href="https://www.nbcnews.com/id/wbna9250306">Katrina</a> and <a href="https://www.washingtonpost.com/politics/2022/09/30/hurricane-relief-votes-hypocrisy/">Sandy</a>, to provide financial aid for residents and communities.</p><img src="https://counter.theconversation.com/content/191860/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shahid S. Hamid receives funding from Florida Office of Insurance Regulation.</span></em></p>About 9% of homeowner property claims nationwide are filed in Florida, yet 79% of lawsuits related to property claims are filed there.Shahid S. Hamid, Professor of Finance, Florida International UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1917252022-10-04T19:31:45Z2022-10-04T19:31:45ZRecovery from a disaster like Hurricane Ian takes years, and nonprofits play many pivotal roles before and after FEMA aid runs out<figure><img src="https://images.theconversation.com/files/487890/original/file-20221003-14-gj3pmc.jpg?ixlib=rb-1.1.0&rect=181%2C71%2C5086%2C3096&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The rebuilding in places like Matlacha, Fla., won't happen overnight.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/APTOPIXTropicalWeatherFlorida/66355fb223d34b6aaadc61999c9f4c31/photo?boardId=37be9465fcce45d283d5431cccb20a6a&st=boards&mediaType=audio,photo,video,graphic&sortBy=&dateRange=Anytime&totalCount=300&currentItemNo=2">AP Photo/Gerald Herbert</a></span></figcaption></figure><p>Massive <a href="https://www.npr.org/live-updates/hurricane-ian-path-south-carolina-2022-09-30">storms like Ian</a> and <a href="https://www.npr.org/2022/10/02/1126462352/puerto-rico-hurricane-fiona-luma-energy-power-outages">Fiona</a> mark the beginning of a <a href="https://theconversation.com/it-takes-years-to-fully-recover-from-big-storms-like-sandy-118381">long and frustrating process</a> for anyone who loses their home and possessions.</p>
<p>Recovery usually takes years.</p>
<p>Everyone’s experience is unique, but I’ve noticed some common patterns <a href="https://scholar.google.com/citations?user=tvPBT_MAAAAJ&hl=en&oi=ao">while researching disaster recovery</a>. Understanding this complex process, which includes dozens of nonprofit and government programs – along with what resources are available and how aid is distributed – can benefit survivors and those who want to help them.</p>
<h2>Initial relief</h2>
<p>At first, relatives, friends and neighbors may provide basic necessities like shelter, child care, transportation, food and water. They might assist with debris removal.</p>
<p>In addition, nonprofits, religious institutions and groups of volunteers flock to affected areas. They remove debris, <a href="https://www.nbcdfw.com/news/local/help-from-north-texas-headed-to-hurricane-damaged-florida/3085143/">place tarps on houses</a> and <a href="https://wsvn.com/news/us-world/non-profit-organizations-asking-for-donations-to-help-those-impacted-by-hurricane-ian/">clean flooded properties</a>.</p>
<p>These <a href="https://doi.org/10.1007/978-3-319-63254-4_6">clusters of do-gooders</a> often <a href="https://www.news4jax.com/news/local/2022/09/30/crisis-cleanup-hotline-helps-with-debris-removal-following-ians-aftermath/">respond to requests</a> via organizations that match disaster survivors with volunteers. </p>
<p><a href="https://www.researchgate.net/publication/265311797_Social_support_in_the_aftermath_of_disasters_catastrophes_and_acts_of_terrorism_Altruistic_overwhelmed_uncertain_antagonistic_and_patriotic_communities">Once this support dissipates</a>, everything gets much harder – including emotionally. </p>
<h2>Where rebuilding funds come from</h2>
<p><a href="https://theconversation.com/flood-risk-ratings-translating-risk-to-future-costs-helps-homebuyers-and-renters-grasp-the-odds-186798">Homeowner and flood insurance</a>, supplemented by savings, are <a href="https://www.huduser.gov/portal/pdredge/pdr-edge-frm-asst-sec-111819.html">the most common sources of money for rebuilding</a> housing destroyed or damaged by disasters.</p>
<p>Unfortunately, <a href="https://www.nahb.org/blog/2022/04/building-materials-prices-start-2022-with-8-percent-increase">rising building costs</a> and housing values have <a href="https://www.nytimes.com/2021/10/08/realestate/homeowners-flood-insurance.html">exacerbated underinsurance</a> – leaving more people without the right kind of insurance or too little coverage. And <a href="https://www.marketwatch.com/picks/heres-exactly-how-much-americans-have-in-savings-at-every-age-and-yikes-heres-what-they-should-have-01659384531">most Americans have less than US$7,000</a> saved up.</p>
<p>Replacing demolished homes <a href="https://www.carriermanagement.com/brand-spotlight/corelogic/reconstruction-often-costs-new-construction/">usually costs more than new construction</a>. Habitat for Humanity, a nonprofit that builds and renovates homes for people unable to afford them, <a href="https://www.habitatcd.org/news/cost-to-build">spends up to $100,000 per house</a>. That is likely less than an individual would pay because of Habitat’s ability to get discounted supplies and its reliance on volunteer labor.</p>
<p>Even those with insurance covering home reconstruction must document all losses and contact insurers right away – starting what could be years of paperwork for reimbursements and applications for several kinds of aid.</p>
<p><iframe id="XFM5E" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/XFM5E/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>FEMA’s role</h2>
<p>Survivors can get up to <a href="https://news.wgcu.org/2022-09-30/federal-disaster-declaration-for-hurricane-ian-impacted-counties-opens-door-for-fema-financial-assistance">$37,900 for home repairs</a> beyond what their insurance covers from the <a href="https://www.fema.gov/assistance/individual">Federal Emergency Management Agency</a>. FEMA also may provide up to $37,900 in individual assistance funds to meet other needs.</p>
<p>Known as IA, these funds can pay for things like child care, funeral expenses, medical costs and furniture after most federally declared disasters. Eligible expenses must be directly linked to the disaster and not covered by insurance or savings.</p>
<p>Survivors <a href="https://www.floridadisaster.org/info/">apply online or at disaster resource centers</a>, which operate in local community centers, gyms or arenas. These temporary offices are one-stop shops where residents learn about and apply for government and nonprofit recovery programs. </p>
<p>I have seen this process frustrate or overwhelm survivors. They find FEMA paperwork grueling because of the details, records and time required.</p>
<p>Even if you qualify for the maximum $37,900 <a href="https://www.federalregister.gov/documents/2021/11/15/2021-24755/notice-of-maximum-amount-of-assistance-under-the-individuals-and-households-program">available in 2022</a>, it is unlikely to fully cover rebuilding costs. And most applicants receive less than that.</p>
<p>Some survivors get only a one-time $500 payment from FEMA to cover what it calls “<a href="https://www.fema.gov/news-release/20200220/bhrany-drwryat-myn-aant">critical needs</a>.”</p>
<p>After <a href="https://doi.org/10.1007/s10584-020-02692-8">Hurricane Harvey struck Texas and Louisiana</a> in 2017, <a href="https://www.politico.com/story/2018/05/29/houston-hurricane-harvey-fema-597912">claimants received an average of about $4,000</a>. In addition, <a href="https://texaslawhelp.org/article/appealing-a-fema-decision">FEMA regularly denies claims</a>. In those cases, FEMA asks disaster survivors for additional documentation if they wish to appeal. Survivors can also appeal to FEMA to increase the amount they were awarded.</p>
<p>Survivors don’t repay FEMA’s individual assistance program if they <a href="https://www.fema.gov/assistance/individual/after-applying">follow all guidelines</a>, such as not using housing funds to get a car. They can also apply for a <a href="https://www.sba.gov/funding-programs/disaster-assistance">Small Business Administration</a> loan to help cover recovery costs for their home or business. </p>
<p>FEMA individual assistance and SBA loan programs usually stop accepting new applications 18 months after a disaster. </p>
<p>People with adequate insurance coverage and enough savings – and who qualify for FEMA grants and Small Business Administration loans – often rebuild their homes as quickly as within six months and generally within two years.</p>
<p>Those ineligible for FEMA’s aid, or those who need more help than it offers, can turn to nonprofits.</p>
<h2>Nonprofits step in</h2>
<p>Many nonprofits aim to support many disaster survivors’ needs, such as housing, mental and physical health care, transportation and employment. They also help survivors file FEMA appeals.</p>
<p><a href="https://www.nvoad.org/all_resources/project-comeback-texas-hurricane-harvey-dcmp-final-report/">Several national nonprofits</a> are experts at disaster case management, helping survivors apply for available services and funding. <a href="https://www.msn.com/en-us/news/us/mennonite-disaster-service-accepting-volunteers-to-help-with-ian-recovery-in-florida/ar-AA12mVc7">Others assist with repairs</a> or complete home rebuilds.</p>
<p><a href="https://www.disastercenter.com/agency.htm">Faith-based nonprofits</a> like United Methodist Committee on Relief, St. Vincent de Paul, Lutheran Disaster Response and INCA Relief USA are among those providing or supporting disaster case management. Mennonite Disaster Services offers much-needed rebuilding and repairs small and large. These organizations stay in affected areas for years to walk survivors through recovery.</p>
<p>I study what are called <a href="https://hazards.colorado.edu/news/research/nonprofit-coordination-and-managing-donations-hidden-keys-to-recovery">long-term recovery groups</a>. They coordinate and collaborate with local and national nonprofits to reduce the burden on disaster survivors so they don’t need to shop around for help at dozens of different organizations.</p>
<h2>HUD’s role</h2>
<p><a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9781315714462-14/understanding-disaster-recovery-adaptation-michelle-annette-meyer">Local and state governments</a> also play a big role. One way is through distributing the funds that originate with the Department of Housing and Urban Development’s <a href="https://www.hudexchange.info/programs/cdbg-dr/">Community Development Block Grant Disaster Recovery</a> program.</p>
<p>Priorities and eligibility for CDBG-DR aid vary for each place and disaster, and this source of assistance helps more than just homeowners. Examples include issuing <a href="https://scholar.google.com/citations?view_op=view_citation&hl=en&user=tvPBT_MAAAAJ&sortby=pubdate&citation_for_view=tvPBT_MAAAAJ:YFjsv_pBGBYC">forgivable loans to landlords to rebuild rental housing</a>, rebuilding public housing, <a href="https://www.rebuild.nc.gov/homeowners-and-landlords/homeowner-recovery-program">buying out properties in floodplains</a> and providing funds to pay for the elevation of homes to make them less likely to be flooded in the future. </p>
<p><a href="https://www.urban.org/urban-wire/why-does-disaster-recovery-take-so-long-five-facts-about-federal-housing-aid-after-disasters">This funding tends to take a long time</a> to access. In 2022, six years after Hurricane Matthew struck South Carolina and North Carolina, <a href="http://resilience.colostate.edu">I participated in a study</a> that found some survivors were still awaiting a response to their application for funds that would pay for either housing elevation or a buyout. </p>
<h2>Some never reach the finish line</h2>
<p>Some people never return and rebuild after a disaster.</p>
<p><a href="https://fred.stlouisfed.org/series/LAORLE0POP">New Orleans’ population is smaller</a> now than before Hurricane Katrina struck in 2005. The city has <a href="https://www.datacenterresearch.org/data-resources/who-lives-in-new-orleans-now/">become more white and Hispanic</a> – indicating that many Black residents never returned.</p>
<p>Permanent displacement happens even in small towns after smaller-scale disasters. A research partner and I found that <a href="https://doi.org/10.1177/0739456X211002910">12% of the houses in the town of West, Texas</a>, weren’t rebuilt within three years of a tragic fertilizer plant explosion that upended life in that community of 2,800 in 2013.</p>
<p>People who recover first are usually <a href="https://www.youtube.com/watch?v=Zlo7lESKWIo">wealthy and white</a>. Those facing many hardships even before a disaster occurs <a href="https://hazards.colorado.edu/news/research-counts/a-place-to-call-home-planning-for-equitable-post-disaster-housing-recovery">are more likely to never</a> fully recover, <a href="https://theconversation.com/how-hurricane-ian-and-other-disasters-are-becoming-a-growing-source-of-inequality-even-among-the-middle-class-191637">because of inequities</a> at each step.</p>
<p>FEMA has <a href="https://www.npr.org/2021/06/29/1004347023/why-fema-aid-is-unavailable-to-many-who-need-it-the-most">found inequities in its own aid processes</a>, confirming what <a href="https://homeland.house.gov/imo/media/doc/2021-10-27-HRG-Testimony-Peek.pdf">scholars have pointed out</a> for years. </p>
<p>Among homeowners, <a href="https://hazards.colorado.edu/news/research-counts/beyond-damages-social-equity-in-allocating-disaster-assistance">those with high incomes</a> in predominantly white communities get more aid than others. Small Business Administration loans hinge on creditworthiness, privileging those with high credit scores and incomes. <a href="https://earthquake.usgs.gov/contactus/menlo/seminars/1347">People over 65</a> may refuse to take on loans because they live on small pensions or Social Security benefits. </p>
<h2>Who gets less help – or none at all</h2>
<p><a href="https://today.tamu.edu/2022/02/10/disasters-can-wipe-out-affordable-housing-forever-unless-communities-plan-ahead-that-loss-hurts-the-economy/">Renters</a> get little of this aid, even though rental properties are the slowest to be repaired and rents rise after disasters because of high demand and low supply.</p>
<p>People who live in mobile homes, as <a href="https://constructioncoverage.com/research/states-investing-most-in-manufactured-housing-2022">many do in Florida</a>, have trouble finding aid to replace demolished housing. <a href="https://doi.org/10.1061/(ASCE)NH.1527-6996.0000357">Mobile home parks are slow to reopen</a> after disasters, if they don’t close for good.</p>
<p>Survivors who are <a href="https://www.americaadapts.org/episodes/undocumented-workers-wildfires-and-climate-change-with-dr-michael-mendez">undocumented immigrants</a> or were <a href="https://hazards.colorado.edu/news/research-counts/preparing-the-whole-community-including-homelessness-in-disaster-planning">homeless before disasters</a> are left out of most government disaster recovery programs.</p>
<p>While nonprofits do make low-income survivors a priority, they work fastest with the <a href="https://www.wmpllc.org/ojs/index.php/jem/article/view/2421">owners of single-family homes</a>. Nonprofits rarely repair mobile homes, rental units or multifamily housing like apartments and condos.</p>
<p>As a result, it’s up to the state and local government agencies that disburse HUD disaster funds to assist with recovery efforts for people who reside in these kinds of <a href="https://www.researchgate.net/publication/323940057_Post-Disaster_Sheltering_Temporary_Housing_and_Permanent_Housing_Recovery">affordable housing</a>.</p><img src="https://counter.theconversation.com/content/191725/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Annette Meyer receives funding from the National Science Foundation, National Institute of Standards and Technologies, National Oceanic and Atmospheric Administration, Sea Grant, and Department of Energy. She has served as an external evaluation consultant for National Voluntary Organizations Active in Disaster.</span></em></p>Many government agencies help people whose lives are thrown off course, but not everyone is eligible or able to access that aid.Michelle Annette Meyer, Director, Hazard Reduction and Recovery Center; Associate Professor of Urban Planning, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1781432022-03-02T19:09:36Z2022-03-02T19:09:36ZAfter the floods comes underinsurance: we need a better plan<p>The floods affecting Australia’s eastern seaboard are a “<a href="https://www.smh.com.au/politics/nsw/flood-fears-for-city-fringe-as-savage-storm-cell-heads-toward-sydney-20220301-p5a0sg.html">1 in 1,000-year event</a>”, according to New South Wales Premier Dominic Perrottet. But that’s not what science, or the insurance industry, suggests.</p>
<p>Throughout Australia in areas prone to fires, cyclones and floods, home owners and businesses are facing escalating insurance costs as the frequency and severity of extreme weather events increase with the warming climate.</p>
<p>Premiums have risen sharply over the past decade as insurers count the cost of insurance claims and factor in future risks. The <a href="https://www.ipcc.ch/report/ar6/wg2/">latest report</a> from the Intergovernmental Panel on Climate Change, published this week, predicts global warming of 1.5°C will lead to a <a href="https://theconversation.com/mass-starvation-extinctions-disasters-the-new-ipcc-reports-grim-predictions-and-why-adaptation-efforts-are-falling-behind-176693">fourfold increase</a> in natural disasters.</p>
<p>Rising insurance premiums are creating a crisis of underinsurance in Australia.</p>
<p>In 2017 the federal government tasked the Australian Competition and Consumer Commission to investigate insurance affordability in northern Australia, where destructive storms and floods are most common. The commission delivered its <a href="https://www.accc.gov.au/focus-areas/inquiries-finalised/northern-australia-insurance-inquiry/final-report">final report</a> in 2020. It found the average cost of home and contents insurance in northern Australia was almost double the rest of Australia – $2,500 compared with $1,400. The rate of non-insurance was almost double – 20% compared with 11%.</p>
<hr>
<p><strong>Average premiums for combined home and contents insurance, 2018–19</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Average premiums for combined home and contents insurance in Australia, 2018–19" src="https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=585&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=585&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=585&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=735&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=735&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449357/original/file-20220302-25-hd3gv4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=735&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ACCC analysis of data obtained from insurers.</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>While the areas now experiencing their worst flooding in recorded history aren’t part of the riskiest areas identified by the insurance inquiry, the dynamics are the same. </p>
<p>Those not insured or underinsured will be financially devastated. Insurance premiums will rise. As a result, more people will underinsure or drop their insurance completely, compounding the social disaster that will come with the next natural disaster. </p>
<p>So, what do about it?</p>
<h2>Tackling insurance affordability</h2>
<p>There are two main ways to reduce insurance premiums. </p>
<p>One is to reduce global warming. Obviously this is not something Australia can achieve on its own, but it can be part of the solution. </p>
<p>The other is to reduce the damage caused by extreme events, by constructing more disaster-resistant buildings, or not rebuilding in high-risk areas. </p>
<p>The federal government, however, has put most of its eggs in a different basket, with a plan to subsidise to insurance premiums in northern Australia.</p>
<p>This won’t do much for those affected by the current floods. It won’t even do much to solve the insurance crisis in northern Australia. </p>
<h2>The reinsurance pool, a blunt tool</h2>
<p>In the 2021 budget the federal government committed A$10 billion to a <a href="https://www.pm.gov.au/media/morrison-government-deliver-reduced-premiums-through-reinsurance-pool">cyclone and flood damage reinsurance pool</a>, “to ensure Australians in cyclone-prone areas have access to affordable insurance”. The legislation to establish this pool is <a href="https://www.legislation.gov.au/Details/C2022B00003">now before parliament</a>. </p>
<p>The ostensible rationale is that the government can drive down insurance costs for consumers by stepping in and acting as wholesaler in the reinsurance market, in which insurers insure themselves against the risk of crippling insurance payouts. </p>
<p>The idea is that discounted reinsurance will lead insurers to lower their premiums. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-national-insurance-crisis-looms-the-morrison-governments-10-billion-pool-plan-wont-fix-it-163796">A national insurance crisis looms. The Morrison government's $10 billion 'pool' plan won't fix it</a>
</strong>
</em>
</p>
<hr>
<p>There is no guarantee, however, that insurers will pass on their cheaper costs to customers. This means the benefits of the pool are unclear. </p>
<p>So are its costs. Effectively, the government is shifting risk from insurers to itself, subsidising insurance premiums for those in some parts the country from the public purse.</p>
<p>The ACCC inquiry gave considerable attention to the idea of a reinsurance pool. While acknowledging there could be some benefits, it concluded the risks outweigh the rewards:</p>
<blockquote>
<p>We do not consider that a reinsurance pool is necessary to address availability issues in northern Australia. </p>
</blockquote>
<h2>Targeting and mitigating</h2>
<p>Above and beyond the aforementioned problems, there are two telling failures of the reinsurance pool plan.</p>
<p>First, subsidising insurance companies doesn’t target help to those who need it most: low-income households. </p>
<p>There is a growing body of research showing that natural disasters, and the ways governments respond to them, is <a href="https://theconversation.com/underinsurance-is-entrenching-poverty-as-the-vulnerable-are-hit-hardest-by-disasters-152083">contributing to greater inequality</a>. </p>
<p>As the South Australian Council of Social Service makes clear in a <a href="https://www.sacoss.org.au/protecting-basics-insurance-report">report published this week</a>, improving insurance access for people on low incomes at risk from natural disaster requires targeted support, such as promoting non-profit “mutual” insurance schemes.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/natural-disasters-increase-inequality-recovery-funding-may-make-things-worse-131643">Natural disasters increase inequality. Recovery funding may make things worse</a>
</strong>
</em>
</p>
<hr>
<p>Second, only mitigation can bring the overall cost of natural disasters down. Ways to do this include public works (building levees, upgrading stormwater systems, conducting planned burns) and improving buildings (reinforcing garage doors, shuttering windows, managing vegetation around homes, and so on). </p>
<p>The ACCC’s insurance report identifies a range of ways mitigation strategies can be tied into insurance pricing. Yet none of these has been incorporated into the Morrison government’s response to the insurance crisis. </p>
<p>There is little support for the reinsurance pool outside of the federal government. Neither the ACCC, the insurance industry nor community sector advocacy organisations support reinsurance as a meaningful solution. </p>
<h2>A reinsurance pool for the whole of Australia?</h2>
<p>For the areas of NSW and Queensland now flooded, as well as the rest of the country outside the ambit of the reinsurance pool, the relentless rise in insurance costs will continue, tipping ever more homes out of the insurance safety net. </p>
<p>We must find better solutions to the insurance crisis than what is being offered to northern Australia. A reinsurance pool cannot be a national solution because it isn’t the solution for northern Australia.</p>
<p>There are no cheap and easy solutions, but the terrain is clearly mapped out across an array of inquiries and reports into insurance and climate vulnerability. More than a blanket subsidy for the insurance industry, the time has come for climate vulnerability to be taken seriously by the federal government.</p><img src="https://counter.theconversation.com/content/178143/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Antonia Settle does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Natural disasters are driving up insurance costs. The Australian government’s plan to drive them down won’t help much.Antonia Settle, Academic (McKenzie Postdoctoral Research Fellow), The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1777882022-02-24T13:51:56Z2022-02-24T13:51:56ZMillions of UK homes are at risk of flooding – here’s how to protect yourself if you live in one of them<p>About <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/292928/geho0609bqds-e-e.pdf">5 million properties</a> are at risk of flooding in England alone. The impacts can be huge: storms Ciara and Dennis in 2020 cost <a href="https://www.abi.org.uk/news/news-articles/2020/03/insurance-pay-outs-to-help-customers-recover-from-storms-ciara-and-dennis-set-to-top-360-million/">£360 million</a> in insurance payouts, while the recent Storm Franklin has flooded <a href="https://floodlist.com/europe/united-kingdom/floods-storm-franklin-february-2022">hundreds of homes</a> across England and Wales. Floods are, by some margin, the most serious natural hazard faced by the UK. </p>
<p>There are large-scale policies that can help. These include improving flood defences, or boosting nature in upstream areas to <a href="https://slowtheflow.net/">slow the flow</a>. But there are also things that people living in flood-prone areas can do to limit impacts to ourselves.</p>
<p>Here are six things that you can do that will help – today and in the future:</p>
<h2>1) Find out if you are at risk</h2>
<p>This sounds obvious, but people often do not know until they are surprised by rising waters – especially if they are new to an area. You can check through the <a href="https://www.gov.uk/check-flood-risk">Environment Agency</a> and sign up for free <a href="https://www.gov.uk/sign-up-for-flood-warnings">flood warnings</a>. </p>
<p>Once you have signed up, prepare an emergency flood kit & <a href="https://thefloodhub.co.uk/wp-content/uploads/2018/11/Household-Flood-Plan.pdf">plan</a> in case you need to leave in a hurry. A flood kit might include: your mobile phone and chargers, contact telephone numbers, any current medication, torch, battery, radio, insurance policy details, rubber gloves, wet wipes, hand cleaning gel, first aid kit and bottled water. </p>
<p>Knowing what to do and having a plan is the first step in successfully <a href="https://twitter.com/SJackaman/status/1496417320109027328">protecting yourself and your stuff</a>. Colleagues and I analysed more than 4,000 cases of damage from six floods in Germany, and found that people knowing what to do when they received an early flood warning reduced the property damage they suffered by <a href="https://journals.ametsoc.org/view/journals/bams/102/7/BAMS-D-20-0262.1.xml">about £8,000</a> on average.</p>
<h2>2) Check your insurance policy</h2>
<p>See what is covered, and what you need to do to claim money back for repairs in a timely way. That £360 million insurance cost of Storms Ciara and Dennis worked out to an average of <a href="https://www.abi.org.uk/news/news-articles/2020/03/insurance-pay-outs-to-help-customers-recover-from-storms-ciara-and-dennis-set-to-top-360-million/">about £32,000</a> per household claim. </p>
<p>Insurance coverage can provide cash you might not otherwise have in order to repair your home. If you have trouble getting insurance, <a href="https://www.abi.org.uk/products-and-issues/topics-and-issues/flood-re/">Flood Re</a> might be able to help: it’s a joint initiative between the government and insurers aimed at homeowners in high-risk areas who might have unaffordable premiums in an open market.</p>
<h2>3) Put important things upstairs</h2>
<p>Water obviously flows downwards so elevation is one of the <a href="https://edition.pagesuite.com/html5/reader/production/default.aspx?pubname=&pubid=b3dddc3f-8c89-4711-86f3-4f0f9ce9a713">key ways to keep property safe</a>. This can mean simple measures, such as keeping your important or irreplaceable items and documents upstairs, or on tall cabinets and shelves. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1496252579055034374"}"></div></p>
<p>Or it can be more complex, such as moving your electrical sockets up the wall so it’s less likely water will enter them, moving your boiler upwards or secure it in place, or putting your white/kitchen goods up on raised platforms to provide extra height before the flood water reaches them. </p>
<p>The same can be said for your vehicles: parking them uphill can keep them safe. But be careful about driving through water, it takes less than you think to stop your car.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Blue car in flooded street" src="https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448344/original/file-20220224-32797-1hjklu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Doesn’t take much water to float a car.</span>
<span class="attribution"><span class="source">AC Rider / shutterstock</span></span>
</figcaption>
</figure>
<h2>4) Keep water out in the first place</h2>
<p>This can be through the use of flood doors to make it less likely water comes in, flood barriers (<a href="https://twitter.com/SCcrowther/status/1496410534534656006">not sandbags</a>) that you can put up in front of doors or window, improved sealing of vents, and <a href="https://floodsafeprojects.co.uk/anti-backflow-valves-in-flood-prevention/">backflow valves</a> to stop water flowing back up through the sewers. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1496032965108932611"}"></div></p>
<p>Though useful, some of these measures have limits. Once the flood waters get high enough, the water will either flow over or just push it over due to the mass of the water.</p>
<h2>5) Use nature to help</h2>
<p>Think about water butts (large barrels that store rainwater), or planting trees and shrubs and avoiding non-permeable surfaces. While not perfect, they can help to <a href="https://www.sciencedirect.com/science/article/pii/S0048969714003659?casa_token=HGiLmiYTfWgAAAAA:eCLan9tPjhv7BSZH2ERFfcTkmoLq4TQtM_lnbEeb9HDqgO3DU9dHiVjAs7En46_Da0jNOJnmtzSt">slow the flow of water</a> so that it goes into the ground rather than into your home. </p>
<p>Flooding can never be 100% stopped, and never 100% for sure, but we can be proactive and prepared to help limit the impacts and help spread awareness of what can be done.</p>
<hr>
<figure class="align-right ">
<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><strong><em>Don’t have time to read about climate change as much as you’d like?</em></strong>
<br><em><a href="https://theconversation.com/uk/newsletters/imagine-57?utm_source=TCUK&utm_medium=linkback&utm_campaign=Imagine&utm_content=DontHaveTimeTop">Get a weekly roundup in your inbox instead.</a> Every Wednesday, The Conversation’s environment editor writes Imagine, a short email that goes a little deeper into just one climate issue. <a href="https://theconversation.com/uk/newsletters/imagine-57?utm_source=TCUK&utm_medium=linkback&utm_campaign=Imagine&utm_content=DontHaveTimeBottom">Join the 10,000+ readers who’ve subscribed so far.</a></em></p>
<hr><img src="https://counter.theconversation.com/content/177788/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Hudson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Six things you can do to help keep you and your home safe.Paul Hudson, Lecturer in Environmental Economics (Disaster Risk Management and Climate Change Adaptation), University of YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1688362021-12-05T19:09:58Z2021-12-05T19:09:58ZIs your neighbourhood underinsured? Search our map to find out<figure><img src="https://images.theconversation.com/files/433658/original/file-20211124-21-5gmyeq.png?ixlib=rb-1.1.0&rect=752%2C0%2C1752%2C1120&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Mapbox/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Underinsurance is more common than <a href="https://www.abc.net.au/everyday/insurance-how-to-prepare-for-floods-fires-and-other-disasters/100581978">many</a> realise. And if you live in an area where most people don’t have enough home and/or contents insurance, the financial and social catastrophe that follows a disaster can be community-wide. </p>
<p>Even if you’re well covered, your neighbourhood may struggle long after the dust has settled, as houses lie derelict, people struggle to bounce back and social cohesion frays.</p>
<p>So, do you live in one of these “pockets of underinsurance”? </p>
<p>Search our interactive map below by <strong>suburb name</strong> or by <strong>postcode</strong> to find out:</p>
<p><iframe id="tc-infographic-611" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/611/d55046490d81e98ad005b744a24f95b3f38812b5/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The map is based on data reported in our <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">study</a> published in the journal <a href="https://journals.sagepub.com/home/epn">Environment and Planning A: Economy and Space</a>. </p>
<p>Suburb-by-suburb data on actual rates of underinsurance doesn’t exist (yet). But we combined data from the 2015 Australian Survey of Social Attitudes (AuSSA) and the Australian Bureau of Statistics to map predicted rates of underinsurance for each suburb in Australia.</p>
<p>In other words, the map shows whether you live in an area where underinsurance is likely to be more prevalent. </p>
<p>The darker the red, the more likely it is many in your neighbourhood do not have enough house and/or contents insurance.</p>
<p>Underinsurance can compound disadvantage. This dynamic is expected to worsen as home ownership drives more people into long-term renting and climate change makes disasters and extreme weather events more frequent – and more severe.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">Insurance is unaffordable for some, but it's middle Australia that is underinsured</a>
</strong>
</em>
</p>
<hr>
<h2>Renters often don’t have contents insurance</h2>
<p>The data show that a poorer suburb with a high rate of rental properties will likely be the most underinsured. But, perhaps counter-intuitively, some wealthier suburbs are showing up as likely having high rates of underinsurance.</p>
<p>That’s because it is housing tenure (whether someone owns or rents) that contributes most significantly to the patterns seen in the map. </p>
<p>Areas with <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">high levels of renting</a> are more likely to be a “pocket of underinsurance” because while a landlord may buy home insurance, renters often don’t have contents insurance. In fact, around 40% of renting households <a href="https://www.sciencedirect.com/science/article/pii/S0016718519302155">don’t have insurance</a>. </p>
<p>Many suburbs mapped as having higher rates of underinsurance have a high proportion of rental properties. This includes wealthier suburbs. </p>
<p>In fact, poorer suburbs with high rates of home ownership are more likely to appear as adequately insured. </p>
<p>For example, zooming in on the municipalities of Hobart and Glenorchy in Tasmania, reveals the more well-heeled Hobart area contains significant areas of underinsurance, similar to that in the more disadvantaged Glenorchy. </p>
<p><iframe id="tc-infographic-619" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/619/a2a3f720efb57b9dbe72e9c51b21d7921d6c98c9/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The take home message is that while income remains a significant indicator of underinsurance risk, renters (both poor or rich) are much more likely to be underinsured than home owners due to a lack of contents insurance.</p>
<h2>What’s driving these trends?</h2>
<p>As property values have climbed, many Australians have been priced out of home ownership and driven into <a href="https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure#:%7E:text=32%25%20(2.6%20million%20households)%20were%20renters%3B%20where%20landlord,state%20or%20territory%20housing%20authorities">long-term renting</a>. And as rents go up, more of the household budget is spent on rental payments. When households are under financial stress, they are <a href="https://melbourneinstitute.unimelb.edu.au/publications/research-insights/search/result?paper=3769030">more likely to drop insurance</a>. </p>
<p>The end result is a lot of renters don’t have contents insurance.</p>
<p>Climate-exacerbated disasters are also driving changes in the affordability and availability of house and/or contents insurance.</p>
<p>Together, these trends in housing, renting, climate change and insurance could potentially create new pockets of entrenched disadvantage. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A city is flooded" src="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A lot of renters don’t have contents insurance.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>I’m well insured, so how does this affect me?</h2>
<p>Without sufficient home and/or contents insurance, both renters and homeowners can struggle to recover from a disaster. </p>
<p>Repairs or rebuilds may be delayed (or too expensive) for homeowners and landlords. Renters may be unable to replace their stuff, or face eviction from a damaged property, and <a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">possible homelessness</a>. </p>
<p>In a disaster like a massive bushfire, demand for emergency housing skyrockets. So even if a household can afford insurance and alternative accommodation, demand for housing may outpace supply.</p>
<p>An area dominated by damaged and uninhabitable properties can lose a sense of community. Those who are well insured may find rebuilding in an otherwise derelict area can be tough. </p>
<p>In contributing to homelessness and a loss of community, underinsurance can lead to loss of social connections and cohesion. It can fragment the collective responses so important for recovery. </p>
<p>In other words, people <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">struggle to bounce back</a>. Some may never get back on their feet.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1460718570934087690"}"></div></p>
<h2>What needs to be done?</h2>
<p>There are many different types of insurance aimed at building individual and collective capacity to recover after disaster.</p>
<p>Some of these, like Flood Re in the United Kingdom and the National Flood Insurance Program in the United States, use the market to set premium prices and <a href="https://www.tandfonline.com/doi/full/10.1080/03085147.2018.1547494">manage risk</a>. The idea is if insurance prices are set according to a particular area’s level of risk, this will encourage people to take action to reduce their risk. </p>
<p>Others, for example in Europe, focus on enabling the <a href="https://www.sciencedirect.com/science/article/pii/S2212096314000072">collective good</a> through insurance affordability and availability. These approaches, which aim to make insurance an option for everyone, better reflect the collective predicament underinsurance represents. </p>
<p>If Australia is to build resilience, then our dependence of individual insurance policies must end. Governments must shift their efforts to equitable, social insurance schemes. </p>
<p><hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/underinsurance-is-entrenching-poverty-as-the-vulnerable-are-hit-hardest-by-disasters-152083">Underinsurance is entrenching poverty as the vulnerable are hit hardest by disasters</a>
</strong>
</em>
</p>
<hr>
</p><img src="https://counter.theconversation.com/content/168836/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Isabel Booth receives funding from the Australian Research Council (DP170100096). She is a member of the Planning Institute of Australia and the Institute of Australian Geographers, and contributes to the activist platform, Just Collapse. </span></em></p>Even if you’re well covered, your area may struggle long after a disaster if most locals don’t have enough home and/or contents insurance. Search our map by postcode or suburb name to check your area.Kate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1690752021-11-29T14:28:00Z2021-11-29T14:28:00ZThe 2021 hurricane season showed US isn’t prepared as climate-related disasters push people deeper into poverty<figure><img src="https://images.theconversation.com/files/432999/original/file-20211121-22767-jzv3z2.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5568%2C3709&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People wade through high water to evacuate a flooded home in LaPlace, La., after Hurricane Ida struck.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/darrin-heisser-evacuates-from-his-flooded-home-with-his-dog-news-photo/1234968464">Patrick T. Fallon/AFP via Getty Images</a></span></figcaption></figure><p>Hurricane Ida hit New Orleans on Aug. 29, 2021, 16 years to the day after Hurricane Katrina flooded the city. This time the levees held. Billions of dollars invested in reinforcing them had paid off – at least for part of the population.</p>
<p>A strong similarity between Ida and Katrina still emerged: Low-income communities and communities of color remain <a href="https://doi.org/10.1086/697168">at high risk</a> from hurricanes.</p>
<p>As scholars <a href="https://scholar.google.com/citations?user=vDqqSPYAAAAJ&hl=en">who study refugees</a> <a href="https://tufts.academia.edu/MarinaLazetic">and migration</a> worldwide, we are finding that the communities most at risk are being pushed into permanent displacement and homelessness, or deeper into poverty, with each climate-related disaster. Much of this could be prevented if the U.S. government invested in preparedness and did more to protect vulnerable communities.</p>
<h2>‘Hunker down’</h2>
<p>Despite years of preparations, New Orleans Mayor Latoya Cantrell said there was no time to issue a mandatory evacuation order as Ida rapidly intensified into a powerful Category 4 hurricane. She urged city residents to “hunker down.” Mass evacuations require coordination among multiple parishes and states, and there wasn’t enough time. In several surrounding parishes, people were told to evacuate, but in low-lying and flood-prone areas, many residents couldn’t <a href="https://apnews.com/article/hurricane-ida-stranded-3afc25cdcb7f5d8347d86f7cc69817e1">afford to leave</a>.</p>
<p>Hurricane Ida became the <a href="https://www.ncdc.noaa.gov/billions/events/US/1980-2021">most destructive storm</a> of the <a href="https://www.nhc.noaa.gov/text/MIATWSAT.shtml">busy 2021 Atlantic hurricane season</a>, which ended Nov. 30. It was one of <a href="https://weather.com/storms/hurricane/news/2021-11-22-2021-hurricane-season-recap">eight named storms</a> to hit the U.S. as the season exhausted the list of 21 tropical storm names for only the <a href="https://theconversation.com/the-2020-atlantic-hurricane-season-was-a-record-breaker-and-its-raising-more-concerns-about-climate-change-150495">third year on record</a>.</p>
<p>While many New Orleans residents breathed a sigh of relief as Ida’s storm surge subsided, the damage outside the city’s levee system was devastating. </p>
<p>In St. John the Baptist Parish, about 30 miles northwest of New Orleans, Ida’s storm surge <a href="https://www.nola.com/news/environment/article_f322128c-11ba-11ec-a6b3-df0c66fb2c5b.html">flooded the largest town, LaPlace</a>, whose residents have faced many natural disasters over the years. Most LaPlace residents couldn’t afford to evacuate. When the storm hit, people <a href="https://www.youtube.com/watch?v=eloCWDwuRNw">pleaded for boat rescues</a>. Two months later, residents were <a href="https://www.fox8live.com/2021/10/29/river-parish-residents-wait-housing-home-repairs-two-months-after-hurricane-ida/">still waiting for repairs</a>, and some were contemplating leaving permanently.</p>
<p>Native communities living in the bayous of coastal Louisiana are also facing the risk of permanent displacement. One example is the Houma people, who saw many of their <a href="https://www.vice.com/en/article/n7bxjk/hurricane-ida-crushed-native-tribes-united-houma-nation-photos">homes damaged or destroyed</a>. The Houma have been <a href="https://unitedhoumanation.org/about/">recognized by the state as a tribe</a> since 1972 but are not recognized by the federal government and thus are not eligible for federal community assistance. Instead, members <a href="https://www.indian.senate.gov/sites/default/files/upload/files/Thomas-Dardar-testimony071912.pdf">apply for assistance as private citizens</a>. Many were left without housing, and their displacement erodes the Houma’s sense of community and connection to their land.</p>
<figure class="align-center ">
<img alt="A young man walks through furniture and household items strewn about by the hurricane, rescuing his mother's belongings." src="https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432988/original/file-20211121-22436-8tl5jj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many homes in LaPlace, La., were unlivable after Hurricane Ida.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/alonzo-lewis-rescues-items-from-his-mothers-home-after-it-news-photo/1337300930">Scott Olson/Getty Images</a></span>
</figcaption>
</figure>
<h2>FEMA aid favors wealthier homeowners</h2>
<p>In many parts of the U.S., the legacy of segregation means that low-income communities are more likely to live in high-risk areas. When Hurricane Harvey flooded Houston in 2017, for example, <a href="https://doi.org/10.1016/j.envres.2019.108772">low-income neighborhoods were most affected</a>. According to the <a href="https://www.houstonconsortium.com/p/report">Greater Houston Flood Mitigation Consortium</a>, a quarter of affordable, multifamily housing lies within a currently mapped floodplain and is vulnerable to future flooding.</p>
<p>As disasters <a href="https://theconversation.com/the-water-cycle-is-intensifying-as-the-climate-warms-ipcc-report-warns-that-means-more-intense-storms-and-flooding-165590">become more frequent</a> in a warming climate, low-income people without adequate assistance in flood- and hurricane-prone areas are likely to be permanently displaced because it will be too costly to try to rebuild.</p>
<p>Agencies like the Federal Emergency Management Agency, the Army Corps of Engineers and the Department of Housing and Urban Development all respond to climate-related emergencies. But the <a href="https://www.fema.gov/sites/default/files/documents/fema_nac-report_11-2020.pdf">absence of any central coordinating agency</a> means the government’s response tends to be disorganized and can even contribute to deepening inequalities. </p>
<p>FEMA, the main source of post-disaster funding, <a href="https://doi.org/10.1111/ssqu.12114">focuses primarily on recovery and reconstruction</a> of property, which favors homeowners and wealthier individuals. The aid is allocated based on cost-benefit calculations designed to minimize taxpayer risk.</p>
<p>When property values are higher, FEMA’s payments for damages are higher, making it easier for wealthier neighborhoods to rebuild. As a result, the majority of the funds are not given to those who need them most but rather to those whose property is worth more. </p>
<figure class="align-center ">
<img alt="A boy with a furrowed brow and sad look sits in a boat with his family as they check on flooded mobile homes." src="https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432947/original/file-20211120-23-n1cdif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Low-income communities along the Louisiana coast were hit hardest by Hurricane Ida.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-maldonado-travel-by-boat-to-their-home-after-it-flooded-news-photo/1337537130">Brandon Bell/Getty Images</a></span>
</figcaption>
</figure>
<p>People with more resources can also apply more easily for aid, whereas the application process can be too complicated and demanding for those without access to up-to-date information and internet service.</p>
<p>FEMA’s Individual Assistance Program provides financial assistance to those who are uninsured, but the program cannot pay for all disaster-related losses. Federal assistance comes either as a loan or as a FEMA grant of about US$5,000 per household. But the <a href="https://www.floodsmart.gov/flood-insurance/requirements">average flood insurance claim</a> in 2018 exceeded $40,000, according to FEMA. </p>
<p>The <a href="https://www.fema.gov/flood-insurance">National Flood Insurance Program</a> helps those who can afford the insurance. But those who are uninsured aren’t able to recover their losses. Disaster cycles ensue in which those who are most at risk <a href="https://www.fema.gov/sites/default/files/documents/fema_nac-report_11-2020.pdf">cannot access funding</a> either to prepare for disasters or to recover from them.</p>
<p>For example, in cases of urban flooding, families who own homes can get up to $30,000 in FEMA grants for rebuilding and recovery. If they have higher incomes, they can also benefit from a tax refund. Wealthier individuals are also more likely to apply for <a href="https://www.sba.gov/funding-programs/disaster-assistance">Small Business Administration low-interest disaster loans</a>.</p>
<p>In contrast, low-income families who are uninsured or who rent a home often <a href="https://doi.org/10.1111/ssqu.12114">receive smaller grants</a> from FEMA and <a href="https://www.lamar.edu/_files/documents/resilience-recovery/grant/recovery-and-resiliency/government-academic-documents/unequal-impact-of-hurricane-harvey-on-household-debt.pdf">do not qualify</a> for significant tax refunds or SBA loans due to low credit scores. </p>
<figure class="align-center ">
<img alt="A man moves cabinet in a kitchen with a missing roof and walls splattered with mud from the storm. Grand Isle, La." src="https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/432945/original/file-20211120-5436-aegu2w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Federal disaster aid focuses on rebuilding damaged homes, including in high-risk locations.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/joseph-szeplaki-cleans-up-his-vacation-house-in-the-wake-of-news-photo/1235061441">Sean Rayford/Getty Images</a></span>
</figcaption>
</figure>
<p>Additionally, richer individuals and families often receive help from their employers and have more flexibility in terms of taking time off to recover and take care of their families. Low-income families generally do not have the luxury to step away from their jobs, and many even lose them as a result of climate-related disaster and business closures. </p>
<p>This means that those with wealth and high incomes experience a very different recovery process than those with fewer possessions and lower income. Climate disasters <a href="https://doi-org.ezproxy.library.tufts.edu/10.1093/socpro/spy016">can drive less-privileged people and people who don’t own property into debt</a> as they become displaced, lose their jobs and must pay higher housing and rent prices due to reduced housing availability. </p>
<h2>How government could help</h2>
<p>Social scientists have been saying <a href="http://doi.org/10.1177/1464993420980939">for decades</a> that natural disasters exacerbate inequalities. New Orleans and Houston are just two examples of the inadequacy of short-term emergency responses. </p>
<p>The U.S. government can minimize the risks and the impact of displacement by planning and preparing for <a href="https://www.gao.gov/products/gao-16-454">both slow- and rapid-onset events</a>. </p>
<p>It can move from a disaster response that is focused on recovering property to one focused on protecting those most at risk. The federal government is starting to make some moves in this direction. In September 2021, it expanded the forms of assistance offered. It also <a href="https://www.nbcnews.com/news/us-news/fema-closes-gap-prevented-many-black-families-south-receiving-disaster-n1278328">expanded the types of home ownership and occupancy documents</a> it accepts, a change meant to help those in homes passed down through generations who <a href="https://www.npr.org/templates/story/story.php?storyId=90005954">lack clear ownership documents</a>. These changes now need to be publicized as part of a wider government strategy to increase protection for low-income residents. </p>
<p>[<em>Get the best of The Conversation, every weekend.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-weeklybest">Sign up for our weekly newsletter</a>.]</p>
<p>Ideally, the government could set up an agency focused on climate-related migration and displacement to research how at-risk areas will be affected and work with residents to find solutions. In our experience, the most effective agencies are those that work closely with local communities.</p>
<p>Strengthening protection in at-risk areas and supporting low-income communities recovering from disasters can help reduce economic and political polarization, population loss and economic decline, and boost protection for all.</p>
<p><em>This article was updated Dec. 1 with the 2021 hurricane season’s final numbers.</em></p><img src="https://counter.theconversation.com/content/169075/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marina Lazetic received funding from Deloitte Consulting and Climate Policy Lab. </span></em></p><p class="fine-print"><em><span>Karen Jacobsen received funding from Deloitte Consulting.</span></em></p>The most vulnerable communities are being pushed deeper into poverty with each climate-related disaster. Part of the problem is that government aid helps the wealthiest people most.Marina Lazetic, Senior Research Analyst and Ph.D. Candidate in Human Security, The Fletcher School, Tufts UniversityKaren Jacobsen, Henry J. Leir Chair in Global Migration, Fletcher School of Law & Diplomacy, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1520832021-02-04T01:59:13Z2021-02-04T01:59:13ZUnderinsurance is entrenching poverty as the vulnerable are hit hardest by disasters<p>More than 70 homes were <a href="https://www.theguardian.com/australia-news/2021/feb/02/fierce-bushfire-in-perth-hills-is-a-threat-to-lives-and-homes-warns-wa-premier">destroyed by bushfires</a> in Western Australia this week, leaving those affected facing enormous costs. After disasters like these, insurance is not always there as needed — or as expected. </p>
<p>In Australia, <a href="https://www.sbs.com.au/news/one-in-eight-australian-adults-one-in-six-kids-are-living-in-poverty">where one in six children live in poverty</a>, significant rates of underinsurance entrench disadvantage and hardship. This dynamic will worsen as the consequences of <a href="https://www.bbc.com/news/science-environment-55147647">unmitigated climate change</a> unfold. </p>
<p><a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">Up to 10% of homeowners</a> or mortgagees are without home insurance and about <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">40% of renters</a> are without contents insurance. Underinsurance can make a bad situation worse, and make it harder <a href="https://onlinelibrary.wiley.com/doi/10.1111/1745-5871.12451">to get back to normal after a disaster</a>. </p>
<p>Our national research suggests simply telling people to get <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">more insurance is not necessarily the answer</a>. To understand that, we need ask <em>why</em> people are underinsured.</p>
<h2>Why are so many underinsured?</h2>
<p>A lot of underinsurance is by accident rather than design. After being burnt out by Victoria’s Black Saturday bushfires in 2009, one of our interviewees, Bridget*, told us: </p>
<blockquote>
<p>You think okay, this is what I paid for the property […] I reckon I could rebuild it for X […] I think we had about A$550,000 on the house, and the contents was maybe $120,000 […] You think sure, yeah I can rebuild my life with that much money. But nowhere near. Not even close. We wound up with a $700,000 mortgage at the end of rebuilding.</p>
</blockquote>
<p>It is hard for people to <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2019.1691436">accurately calculate repair or rebuild costs</a>. Risks are uncertain, insurers have their own complex rules, and <a href="https://understandinsurance.com.au/calculator/building-calculator">online calculators come with their own fine print</a>. </p>
<p>Renters are at risk of underinsurance as they tend to <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">forego contents insurance</a>, though the building itself will probably be insured by the landlord. </p>
<p>Following the Hobart floods in 2018, one of our interviewees, John, was without contents insurance when his rented home was flooded. He told us:</p>
<blockquote>
<p>We were wondering about temporary accommodation, whether they would put us up until we found a new place to live […] They said that that was under contents insurance, which was our responsibility, and the house insurance just covers the house.</p>
</blockquote>
<h2>Lack of trust</h2>
<p>If you are on a lower income, you are more likely to be underinsured. Sandra, who lives in a bushfire-prone area, described to us her <a href="https://www.sciencedirect.com/science/article/pii/S0016718515302207">decision-making when buying insurance on a limited budget</a> by saying:</p>
<blockquote>
<p>The contents is insured to $20,000 … We’ve got a lot of irreplaceable stuff here … and a lot of equipment of value … the value is going to be far more than that. But I just hope that we’d have like a small kitty that would be like $20,000. I figured would be enough to replace just the essential items.</p>
</blockquote>
<p>Rosalie and her family live <a href="https://journals.sagepub.com/doi/full/10.1177/2514848620921859">without any house and contents insurance</a>, and illustrate another reason for underinsurance:</p>
<blockquote>
<p>Just the way they (insurers) word things […] they’re trying to make sure they exclude certain things, and while we sort of fall within the parameters of what’s included, I have a feeling that they’ll go, ‘oh no, you’ve got a dingle on your dangle and it’s just not included’.</p>
</blockquote>
<p>A <a href="https://www.sciencedirect.com/science/article/pii/S0016718519302155">lack of trust in insurers</a> may be based on previous experience of an insurance claim not coming through as expected, or in political perspectives questioning the power of large corporations. </p>
<h2>More insurance is not a straightforward solution</h2>
<p>More insurance may help renters and home owners. But to decide <em>how much more</em>, you need access to accurate rebuild or valuation costs. Accessing, understanding and keeping up to date with complex knowledge about risk and construction is beyond the capacities of many who already live busy lives. And to make decisions about contents insurance, renters need capacity and time to understand the risks of being an underinsured renter.</p>
<p>Simply encouraging people to get more insurance doesn’t help people like Sandra, who are on a limited budget, nor will it address distrust of insurers. </p>
<p>Instead of telling people to buy more of the right type of insurance, we should be asking how insurance can work better for people. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">Insurance is unaffordable for some, but it's middle Australia that is underinsured</a>
</strong>
</em>
</p>
<hr>
<h2>Making insurance work</h2>
<p>Insurance spreads costs and risks across populations; it recognises shared interests can create shared benefits. Maintaining the public benefit of insurance includes making it more equitable through government regulation and consumer demand.</p>
<p>Insurance should remain about the equitable distribution of costs and risks so everyone has a safety net if disaster strikes. </p>
<p>We must resist the trend towards <a href="https://www.investopedia.com/terms/i/insurtech.asp">insurance products that are tailored</a> in response to individual characteristics and risks. This individualisation favours those with higher incomes and lower levels of risk, and marginalises disadvantaged populations living with higher risk. In other words, it puts insurance out of reach for those most likely to need it.</p>
<p>Governments should not view insurance as <em>the</em> key disaster recovery tool, and must not rely on individuals to manage their own risks with insurance. </p>
<p><a href="https://knowledge.aidr.org.au/resources/ajem-october-2020-why-insurance-matters-insights-from-research-post-disaster/">Insurance is only one tool</a> in disaster preparedness and recovery. Others — including building code reform, effective land-use planning, and a well-funded social safety net — require strong government leadership. </p>
<p>In a changing climate, governments must recognise we are all in this together. Telling people “Well, you should have been insured” when there are so many reasons why someone might be underinsured is unhelpful, unfair, divisive and allows governments to shirk their responsibilities toward all citizens.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-crisis-of-underinsurance-threatens-to-scar-rural-australia-permanently-129343">A crisis of underinsurance threatens to scar rural Australia permanently</a>
</strong>
</em>
</p>
<hr>
<p><em>* All names have been changed to protect identities.</em></p>
<p><em>This story is part of a series The Conversation is running on the nexus between disaster, disadvantage and resilience. It is supported by a philanthropic grant from the Paul Ramsay foundation. You can read the rest of the stories <a href="https://theconversation.com/au/topics/disaster-and-resilience-series-97537">here</a>.</em></p><img src="https://counter.theconversation.com/content/152083/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Isabel Booth has received funding from the Australian Research Council for the research reported in this article. She is a member of the Planning Institute of Australia and the Institute of Australian Geographers.
</span></em></p><p class="fine-print"><em><span>Chloe Lucas received funding from the Australian Research Council for the research reported in this article. She is a member of the Institute of Australian Geographers and the International Environment Communication Association.</span></em></p><p class="fine-print"><em><span>Christine Eriksen received funding from the Australian Research Council for the research reported in this article. She is affiliated with the Center for Security Studies at ETH Zürich and a fellow of the Royal Geographical Society with the Institute of British Geographers. </span></em></p>Instead of telling people to buy more of the right type of insurance, we should be asking how insurance can work better for people.Kate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaChloe Lucas, Research Fellow, Geography, Planning, and Spatial Sciences, University of TasmaniaChristine Eriksen, Senior Researcher, Swiss Federal Institute of Technology ZurichLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1140532019-03-22T10:44:43Z2019-03-22T10:44:43ZWhy flood insurance needs an overhaul: 6 questions answered<p><em>Editor’s note: The Trump administration plans to <a href="https://www.bloomberg.com/news/articles/2019-03-18/climate-advocates-cheer-trump-policy-shift-on-flood-insurance">significantly revamp the pricing of flood insurance</a>. While some homeowners would see their premiums rise, others would benefit from lower rates. We asked an insurance expert to explain what the government program currently works and why it’s in dire need of fixing.</em></p>
<h2>1. What is flood insurance?</h2>
<p>Homeowners’ insurance does not cover damage to a home caused by flooding. A homeowner must have a separate policy to cover flood-related losses, defined as water traveling along or under the ground.</p>
<p>Most such policies are underwritten by the <a href="https://www.fema.gov/national-flood-insurance-program">National Flood Insurance Program</a>, which is part of the Federal Emergency Management Agency. The program was established in 1968 to address the lack of availability of flood insurance in the private market and reduce demand for federal disaster assistance. It also contains <a href="https://www.fema.gov/floodplain-management-requirements">provisions</a> intended to reduce flood risk.</p>
<p>The National Flood Insurance Program’s activities are funded largely by the premiums and fees paid by its policyholders, supplemented by a little from the federal budget to help pay for flood risk mapping. Because the program <a href="https://www.fema.gov/media-library-data/1385590588018-fef2f58685fac4e186105be4c6ac51be/Sandy_MAT_AppF_508post.pdf">serves the public interest</a> by promoting “sound land use” and minimizing exposure of property to flood losses, <a href="https://morningconsult.com/opinions/save-national-flood-insurance-investing-nature/">some</a> believe that more of its funding for flood risk management should be borne by taxpayers. </p>
<p>Homeowners can purchase a federal flood policy directly from the program or through a private insurer. Separately, some private insurers sell their own flood policies on a limited basis for properties that are overcharged by the government’s program.</p>
<h2>2. How many American homeowners have flood insurance?</h2>
<p>It is difficult to determine exactly how many homeowners have flood insurance. </p>
<p>The National Flood Insurance Program <a href="https://www.fema.gov/policies-force-month">had just over 5 million policies in force</a> as of this January. Of these policies, approximately 69 percent were on single-family homes and 20 percent on condo units. There is no source on how many private flood policies are in force, but my sense is that that they represent only about 15 percent of all policies sold nationally.</p>
<p>In recent years, the <a href="https://bsa.nfipstat.fema.gov/reports/1011.htm">number of such policies</a> has been dropping across the country over concerns about the cost and because people underestimate the risk of flooding. In Nebraska, the hardest hit by recent record flooding in the Midwest, <a href="https://www.cbsnews.com/news/river-flooding-in-midwest-damage-will-likely-total-more-than-1-billion/">there are fewer than 10,000 policies</a> for a state with almost 2 million residents. The damage is expected to exceed US$1 billion. </p>
<p>Even hurricane-prone areas, such as those hit by Harvey in 2017, are woefully underinsured. In Harris County, which includes Houston, for example, <a href="http://abcnews.go.com/US/consumer-flood-insurance-wake-hurricane-harvey/story?id=49535161">experts estimated</a> before Harvey that only about 15 percent of homeowners were insured for floods – though the percentage should be higher in areas near coastlines.</p>
<p>Real estate data company <a href="https://www.corelogic.com/news/wildfires-and-hurricane-related-floods-were-most-destructive-natural-hazards-in-2017.aspx">CoreLogic</a> estimated that approximately 75 percent of flood losses from Harvey were uninsured, a figure that totaled about 80 percent for Hurricane Irma.</p>
<h2>3. Why do people at great risk of flooding forgo insurance?</h2>
<p>A <a href="https://riskcenter.wharton.upenn.edu/publications/">number of factors</a> affect a homeowner’s decision to buy flood insurance – or not. </p>
<p>People who perceive that their exposure to floods is high are more likely to buy it, all other things equal. While a <a href="https://www.fema.gov/faq-details/Mandatory-Purchase-of-NFIP-Coverage/">mandatory purchase requirement</a> is intended to force owners of mortgaged homes in areas at high risk of flooding to buy insurance, <a href="https://www.bloomberg.com/news/articles/2017-09-13/hurricanes-highlight-failure-to-enforce-flood-insurance-rules">it’s estimated</a> that only about half of them do. </p>
<p>One reason might be that 43 percent of homeowners <a href="http://www.iii.org/sites/default/files/docs/pdf/pulse-wp-020217-final.pdf">incorrectly believe</a> that their homeowners’ insurance covers them for flood losses.</p>
<p>Other factors also come into play, such as a lack of information, the difficulty of calculating flood risk and the expectation that the government will provide disaster assistance that will fully cover a homeowner’s uninsured flood losses – which is in fact <a href="https://www.nytimes.com/2017/08/30/business/harvey-aid-sba-disaster-loans.html?mcubz=1&_r=0">rarely the case</a>.</p>
<h2>4. What does flood insurance cover?</h2>
<p>With a <a href="https://www.fema.gov/media-library-data/20130726-1620-20490-4648/f_679_summaryofcoverage_11_2012.pdf">National Flood Insurance Program policy</a>, a homeowner can purchase coverage on a dwelling up to $250,000 and the contents of a home up to $100,000. It does not cover costs associated with “loss of use” of a home. </p>
<p>These limits have been in effect since 1994 and are no longer high enough to account for the increase in the replacement cost of homes and the actual cash value of their contents. As a result, some homeowners buy additional flood protection from private insurers to make up any shortfall. </p>
<h2>5. Why is the National Flood Insurance Program underwater?</h2>
<p>The National Flood Insurance Program <a href="http://www.gao.gov/assets/690/684354.pdf">has faced considerable criticism</a> over its underwriting and pricing of policies, which have resulted in a substantial debt. Essentially, its premiums are not high enough to cover how much it pays out on claims and its other costs. </p>
<p>Part of the problem is that <a href="https://www.fema.gov/media-library-data/1382115115666-0fba8b9a68fef69d546513c6da105bbe/BW12_AgentWhat_to_Know_Say_Sect205_Sept2013.pdf">about 20 percent of the properties</a> the program insures pay a subsidized rate. But many other National Flood Insurance Program policyholders are also paying premiums <a href="http://www.foxbusiness.com/politics/2017/08/29/key-flood-insurance-underwriter-sinks-further-into-debt-as-harvey-slams-texas.html">substantially less</a> than what it costs to insure them based largely on whether a home is inside or outside of the 100-year floodplain. </p>
<p>To show how much single storms can cost, the National Flood Insurance Program <a href="https://www.fema.gov/significant-flood-events">paid out $8.7 billion</a> to cover Harvey-related flood losses, $16.3 billion for Katrina and $8.8 billion for Sandy. </p>
<p>These inadequate rates also exacerbate the <a href="http://blogs.colgate.edu/economics/files/2014/09/McGee-2014-Moral-Hazard-and-the-National-Flood-Insurance-Program.pdf">moral hazard created by flood insurance</a>. People are more likely to buy, build or rebuild homes in flood-prone areas and have diminished incentives to invest in flood risk mitigation, such as by elevating their home, if they can buy insurance at below-cost rates. </p>
<p>Although Congress <a href="https://www.businessinsurance.com/article/20171027/NEWS06/912316843/Trump-signs-disaster-relief-bill-forgiving-16-billion-dollars-NFIP-debt">forgave</a> $16 billion in debt in 2017, the National Flood Insurance Program still owed <a href="https://www.gao.gov/assets/700/697245.pdf">$21 billion</a> to the U.S. Treasury as of September. </p>
<p><iframe id="hnDTa" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/hnDTa/7/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>6. What can be done to fix the program?</h2>
<p>Legislative efforts to reform the National Flood Insurance Program to put it on firmer fiscal footing have produced mixed results. </p>
<p>The <a href="https://www.fema.gov/media-library/assets/documents/31946">Biggert-Waters Act of 2012</a> made a number of changes to the program, such as increasing premiums, to make it “<a href="https://www.fema.gov/media-library-data/20130726-1912-25045-9380/bw12_qa_04_2013.pdf">more financially stable</a>.” While that would have gone a long way to restore its fiscal solvency, an outcry from homeowners in high-risk areas led to the 2014 <a href="https://www.fema.gov/media-library/collections/414">Homeowners Flood Insurance Affordability Act</a>, which limited or rescinded many of the Biggert-Waters rate increases. </p>
<p>Fundamentally, the program that millions of Americans rely on to help them rebuild their lives after a devastating flood <a href="https://www.marsh.com/us/insights/research/reforming-the-national-flood-insurance-program.html">needs to be fixed</a>. Its dire financial straits could be resolved by either making taxpayers foot more of the bill or increasing premiums closer to full-cost rates for most homeowners, while also raising total coverage levels.</p>
<p>The Trump administration for its part <a href="https://www.bloomberg.com/news/articles/2019-03-18/climate-advocates-cheer-trump-policy-shift-on-flood-insurance">proposes calculating premiums</a> to more accurately reflect the actual flood risk individual homes face beginning in 2020. This could result in higher rates for many homeowners.</p>
<p>But I believe the government also needs to do more to convince or compel more at-risk homeowners to buy flood insurance – which would be harder to do if it were to raise rates. To me, this suggests that increasing taxpayer support for the program will have to be part of the solution so that pricey premiums don’t become a deterrent to someone buying insurance. </p>
<p><em>This is an updated version of an <a href="https://theconversation.com/how-flood-insurance-works-6-questions-answered-83187">article</a> originally published on Sept. 7, 2017.</em></p><img src="https://counter.theconversation.com/content/114053/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert W. Klein does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Trump administration has proposed a major revamp of the National Flood Insurance Program since its inception in 1968. Here’s why it needs fixing.Robert W. Klein, Professor Emeritus of Risk Management and Insurance, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1126072019-03-03T19:05:47Z2019-03-03T19:05:47ZTownsville floods show cities that don’t adapt to risks face disaster<p>A flood-ravaged Townsville has captured public attention, highlighting the vulnerability of many of our cities to flooding. The <a href="https://www.abc.net.au/news/2019-02-15/queensland-floods-special-climate-statement/10816184">extraordinary amount of rain</a> is just one aspect of the disaster in Queensland’s third-biggest city. The flooding, increasing urban density, the management of the Ross River Dam, and the difficulties of dealing with byzantine insurance regulations have left the community with many questions about their future. </p>
<p>These questions won’t be resolved until we enhance the resilience of cities and communities against flooding. Adaptation needs to become an integral part of living with the extremes of the Australian environment. I discuss how to design and create resilient urban landscapes later in this article.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/queenslands-floods-are-so-huge-the-only-way-to-track-them-is-from-space-111083">Queensland's floods are so huge the only way to track them is from space</a>
</strong>
</em>
</p>
<hr>
<h2>Flood risk and insurance</h2>
<p>Another issue that affects many households and businesses is the relationship between insurance claims and <a href="https://www.preventionweb.net/news/view/63766">1-in-100-year flood event overlay maps</a>. Projected rises in flood risks under climate change have led to <a href="https://www.theguardian.com/australia-news/2019/feb/20/townsville-homes-may-become-uninsurable-due-to-flooding-from-climate-change">concerns that parts of Townsville and other cities will become “uninsurable”</a> should the costs of cover become prohibitive for property owners. </p>
<p>Council flood data <a href="https://www.preventionweb.net/news/view/63766">used for urban planning and land-use strategies</a> is also used by insurers to assess the flood risk to individual properties. Insurers then price the risk accordingly. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/lessons-in-resilience-what-city-planners-can-learn-from-hobarts-floods-96529">Lessons in resilience: what city planners can learn from Hobart's floods</a>
</strong>
</em>
</p>
<hr>
<p>However, in extraordinary circumstances, when the flooded land is actually larger than the area marked by the flood overlay map, complications emerge. In fact, that part of the community living outside the map’s boundaries is considered flood-free. Thus, those pockets of the community may have chosen not to have flood insurance and not have emergency plans, which leaves them even worse off after floods. This is happening in Townsville. </p>
<p>Yet this is nothing new. Many people experienced very similar circumstances in 2011. Flood waters covered as much land as Germany and France combined. Several communities were left on their knees. </p>
<p>Notwithstanding the prompt and vast response of the federal government and Queensland’s state authorities, a few years later Townsville is going through something alarmingly similar.</p>
<h2>Adaptation to create resilient cities</h2>
<p>To find a solution, we need to rethink how to implement the <a href="https://www.disaster.qld.gov.au/dmg/Prevention/Pages/3-5.aspx">Queensland Emergency Risk Management Framework</a>. That is no easy task. However, it starts with shifting the perspective on what is considered a risk – in this case, a flooding event. </p>
<p>Floods, per se, are not a natural disaster. Floods are part of the natural context of Queensland as can be seen below, for instance, in the <a href="https://www.qhatlas.com.au/content/channel-country">Channel Country</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/261144/original/file-20190227-150724-xvwvfx.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Floods are part of the Australian landscape. Here trees mark the seasonal riverbeds in the Queensland outback between Cloncurry and Mount Isa.</span>
<span class="attribution"><span class="source">Cecilia Bischeri</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The concept of adaptation as a built-in requirement of living in this environment then becomes pivotal. In designing and developing future-ready cities, we must aim to build resilient communities. </p>
<p>This is the ambitious project I am working on. It involves different figures and expertise with a shared vision and the support of government administrations that are willing to invest in a future beyond their elected term of office.</p>
<h2>Ideas for Gold Coast Resilientscape</h2>
<p>I live and work in the City of Gold Coast. Water is a fundamental part of the city’s character and beauty. In addition to the ocean, a complex system of waterways shapes a unique urban environment. However, this also exposes the city to a series of challenges, including flooding. </p>
<p>Last September, <a href="https://www.gchaveyoursay.com.au/industryhub/news_feed/updated-flood-overlay-maps">an updated flood overlay map</a> was made available to the community. The map takes into account the projections of a 0.8 metre increase in the sea level and 10% increases in storm tide intensity and rainfall intensity. </p>
<p>These factors are reflected in the 1-in-100-year flood overlay. It shows undoubtedly that the boundaries between land and water are changeable.</p>
<p>Building walls between the city and water as the primary flood protection strategy is not a solution. A rigid border can actually intensify the catastrophe. New Orleans and the <a href="https://soundwaves.usgs.gov/2006/01/">levee failures</a> during the passage of Hurricane Katrina in 2005 provide a stark illustration of this. </p>
<p>Instead, what would happen and what would our cities look like if we designed green and public infrastructures that embody flooding as part of the natural context of our cities and territory?</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/design-for-flooding-how-cities-can-make-room-for-water-105844">Design for flooding: how cities can make room for water</a>
</strong>
</em>
</p>
<hr>
<p>The current project, titled RESILIENTSCAPE: A Landscape for Gold Coast Urban Resilience, considers the role of architecture in enhancing the resilience of cities and communities against flooding. The proposal, in a nutshell, explores the possibilities that urban landscape design and implementation provide for resilience. </p>
<p>RESILIENTSCAPE focuses on the Nerang River catchment and the Gold Coast Regional Botanic Gardens, in the suburb of Benowa. The river and gardens were adopted as a case study for a broader strategy that aims to promote architectural solutions for a resilient City of Gold Coast. The project investigates the possibility of using existing green pockets along the Nerang River to store and retain excess water during floods. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/261354/original/file-20190228-150721-xt0v13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Gold Coast Regional Botanic Gardens is one of the green areas along the Nerang River that could be used to store and retain flood water.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Gold_Coast_Regional_Botanic_Gardens_(08).jpg">Batsv/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>These green spaces, however, will not just serve as “water tanks”. If mindfully planned, the green spaces can double up as public parks and facilities. This would enrich the community’s social realm and maximise their use and return on investment. </p>
<p>The design of a landscape responsive to flooding can, by improving local urban resilience, dramatically change the impact of these events. </p>
<p>The goal of creating urban areas that are adaptive to an impermanent water landscape is the main driver of the project. <a href="https://www.fastcompany.com/3068730/this-new-orleans-neighborhood-is-fighting-flooding-by-welcoming-it">New Orleans</a> after <a href="https://theconversation.com/disappearing-acts-reflecting-on-new-orleans-10-years-after-katrina-46834">Hurricane Katrina</a> and<a href="https://archpaper.com/2017/10/five-years-sandy-nyc-update-flood-resilience-zoning/"> New York</a> after <a href="https://theconversation.com/frankenstorm-sandy-wreaks-havoc-on-nyc-floods-cities-10420">Sandy</a> are <a href="https://www.nisconsortium.org/nisc-activities/neworleansfloodresexp/">investing heavily in this direction</a> and promoting <a href="http://www.rebuildbydesign.org/">international design competitions</a> and community participation to mould a more resilient future. Queensland, what are we waiting for?</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/floods-dont-occur-randomly-so-why-do-we-still-plan-as-if-they-do-93371">Floods don't occur randomly, so why do we still plan as if they do?</a>
</strong>
</em>
</p>
<hr>
<hr>
<p><em>This article has been updated to clarify the use of flood data by insurers in assessing risk and the cost of cover.</em></p><img src="https://counter.theconversation.com/content/112607/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cecilia Bischeri does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Amid fears that parts of Townsville and other Australian cities might become “uninsurable”, making urban areas more resilient and adaptable to flooding is becoming more urgent.Cecilia Bischeri, Lecturer in Architecture, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1056622018-11-19T19:06:13Z2018-11-19T19:06:13ZInsurance is unaffordable for some, but it’s middle Australia that is underinsured<p>House and contents underinsurance looks like <a href="https://theconversation.com/properties-under-fire-why-so-many-australians-are-inadequately-insured-against-disaster-50588">a problem in need of a solution</a>. It is estimated around <a href="https://www.emv.vic.gov.au/news/insure-it-its-worth-it-campaign-launched">half of Australians</a> don’t have an insurance policy that fully covers their assets. Without insurance, households are unable to “bounce back” after a disaster or emergency event. </p>
<p>A lack of insurance has been associated with issues of affordability. It has been assumed that households suffering financial hardship and disadvantage are at risk of being underinsured. If their property is lost or damaged, underinsurance would lead to hardship and disadvantage becoming more entrenched. </p>
<p>But <a href="https://insuranceresearchblog.wordpress.com/">emerging research</a> in Australian cities shows that rental status rather than socio-economic disadvantage is a driver of underinsurance. The prevalence of “middle Australian” renters who don’t have contents insurance is challenging the idea that affordability is the real issue.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-shocking-truth-about-insurance-we-pick-bad-policies-even-with-good-information-103515">The shocking truth about insurance. We pick bad policies even with good information</a>
</strong>
</em>
</p>
<hr>
<h2>What are the risks for renters?</h2>
<p>Renters appear low risk. For these people, a disaster or emergency event might involve a loss of personal possessions but not of a housing asset. But, following a disaster, renters can face eviction, homelessness or be forced to live in a damaged property. </p>
<p>A renter we interviewed described being evicted on the morning after <a href="https://theconversation.com/lessons-in-resilience-what-city-planners-can-learn-from-hobarts-floods-96529">Hobart’s recent floods</a>:</p>
<blockquote>
<p>We were wondering about temporary accommodation, whether they would put us up until we found a new place to live … They said that that was under contents insurance, which was our responsibility, and the house insurance just covers the house.</p>
</blockquote>
<p>Unable to find a new rental, he and his friends couch-surfed for six weeks. “It was really quite stressful … not knowing where we were going to go.”</p>
<p>Another renter stayed in her flood-damaged house and found the lack of communication about repairs frustrating. </p>
<blockquote>
<p>We’re trying to keep the communication going, like taking photos of things as they deteriorate … This massive fungus grew from the wall and we were like ‘Here, this is what’s happening in the bathroom’ … but not getting any response back. </p>
</blockquote>
<p>With an increasing number of households in the rental market in Australian cities,
exactly how insurance interacts with rental experiences merits a closer look. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ideas-of-home-and-ownership-in-australia-might-explain-the-neglect-of-renters-rights-104849">Ideas of home and ownership in Australia might explain the neglect of renters’ rights</a>
</strong>
</em>
</p>
<hr>
<h2>Where does climate change come into it?</h2>
<p>Our findings also show that households aren’t making the connection between insurance and climate change. Despite a predicted increase in impacts, Australians generally assume that disasters will not affect the price of insurance. </p>
<p>In response to new risk modelling, parts of cyclone-prone northern Australia have experienced rising premiums – <a href="https://rsa.tandfonline.com/doi/abs/10.1080/02697459.2018.1430458#.W9e73tUzaUk">350% increases for strata properties in the case of Port Hedland</a>. Unmitigated flood threats in New South Wales and Queensland have resulted in significant price increases or even in insurance becoming unavailable.</p>
<p>Households in rural and regional areas are more likely to be insured than those in cities. Previous research suggests this is because <a href="http://journals.sagepub.com/doi/abs/10.1177/0042098017736257">rural residents are more attuned to environmental conditions</a>. In cities, residents can feel less connected and less exposed to environmental changes. </p>
<p>Australian cities are becoming denser and losing greenery, which might contribute to declining environmental awareness. Cues from plants are important drivers of people’s perceptions of environmental change. In one study, the <a href="http://dx.doi.org/10.1016/j.jenvp.2011.12.002">presence of dead pot plants</a> was found to strengthen belief in global warming. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/were-investing-heavily-in-urban-greening-so-how-are-our-cities-doing-83354">We're investing heavily in urban greening, so how are our cities doing?</a>
</strong>
</em>
</p>
<hr>
<p>Other visible clues to the environmental changes happening in our cities may also be hidden by engineered solutions such as the enclosure of watercourses in stormwater drains. As one of the renters affected by the Hobart flooding said, the risk “hadn’t really crossed my mind. It just seemed like quite a tame climate.”</p>
<h2>What are the implications?</h2>
<p>Uninsured or underinsured households lack the self-sufficiency that frees governments from significant spending on recovery. Unsurprisingly, governments are <a href="http://www.insureit.vic.gov.au/">aiming to improve insurance coverage to lessen vulnerability and build resilience</a>. Underinsurance is seen as a social welfare issue and appears to draw attention to the need for improved financial literacy. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/lessons-in-resilience-what-city-planners-can-learn-from-hobarts-floods-96529">Lessons in resilience: what city planners can learn from Hobart's floods</a>
</strong>
</em>
</p>
<hr>
<p>Submissions to the <a href="https://financialservices.royalcommission.gov.au/Pages/default.aspx">Financial Services Royal Commission</a> highlight some issues that householders face when dealing with insurance. But there is more to understanding how households think about insurance and why so many are underinsured. </p>
<p>Our research illustrates how <a href="https://theconversation.com/home-ownership-foundations-are-being-shaken-and-the-impacts-will-be-felt-far-and-wide-91664">rapid urban change</a> is likely affecting insurance uptake. Those living in disadvantage are at risk, but underinsurance must be uncoupled from simple assumptions about affordability. How renters fare when property is destroyed or damaged appears significantly different from home owners, but no less problematic. </p>
<p>If house and contents insurance is to help in “bouncing back” from disaster events, we need to know more about this and about urban environmental awareness.</p><img src="https://counter.theconversation.com/content/105662/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Booth receives funding from the Australian Research Council (DP170100096) and collaborates on Tourism Tracer, partly funded by Tasmanian Government (State Growth), Tourism Industry Council Tasmania and Federal Group. She is a member of the Planning Institute of Australia and donates to planning- and environment-related non-government organisations.</span></em></p><p class="fine-print"><em><span>Chloe Lucas is a postdoctoral research fellow on the Australian Research Council Discovery Project 'Geographies of house and contents under-insurance' (DP170100096). She is a member of the Institute of Australian Geographers and the International Environment Communication Association. </span></em></p>The differences between owners and the growing number of renters, and between rural and urban areas, point to explanations other than affordability for the one-in-two Australians who are underinsured.Kate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaChloe Lucas, Postdoctoral research fellow, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1030582018-09-12T18:46:34Z2018-09-12T18:46:34ZWhat is flood insurance and why the system is broken: 6 questions answered<figure><img src="https://images.theconversation.com/files/236092/original/file-20180912-133877-1n9qad0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">High tides, whipped in by Hurricane Hazel in 1954, shattered boats and buildings in Swansboro, N.C.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Tropical-Storms-Carolinas/b64046ffe46546e58ce4a10b2021697e/1/0">AP Photo, File</a></span></figcaption></figure><p><em>Editor’s note: Homeowners generally rely on insurance provided by the federal government to cover the costs of rebuilding their lives after a flood. We asked an insurance expert to explain the government program and its challenges.</em></p>
<h2>1. What is flood insurance?</h2>
<p>Homeowners’ insurance does not cover damage to a home caused by flooding. A homeowner must have a separate policy to cover flood-related losses, defined as water traveling along or under the ground.</p>
<p>Most such policies are underwritten by the <a href="https://www.fema.gov/national-flood-insurance-program">National Flood Insurance Program</a>, which is part of the Federal Emergency Management Agency. The program was established in 1968 to address the lack of availability of flood insurance in the private market and reduce demand for federal disaster assistance. It also contains <a href="https://www.fema.gov/floodplain-management-requirements">provisions</a> intended to reduce flood risk.</p>
<p>The National Flood Insurance Program’s activities are funded largely by the premiums and fees paid by its policyholders, supplemented by a little from the federal budget to help pay for flood risk mapping. Because the program serves the public interest, <a href="https://morningconsult.com/opinions/save-national-flood-insurance-investing-nature/">some</a> believe that more of its funding for flood risk management should be borne by taxpayers. </p>
<p>Homeowners can purchase a federal flood policy directly from the program or through a private insurer. Separately, some private insurers sell their own flood policies on a limited basis for properties that are overcharged by the government’s program.</p>
<h2>2. How many homeowners have flood insurance?</h2>
<p>It is difficult to determine exactly how many homeowners have flood insurance. </p>
<p>The National Flood Insurance Program <a href="https://www.fema.gov/policy-claim-statistics-flood-insurance">had just over 5 million policies in force</a> as of May 31. Of these policies, approximately 69 percent were on single-family homes and 21 percent on condo units. There is no source on how many private flood policies are in force, but my sense is that it is comparatively small.</p>
<p>In recent years, the number of such policies has been dropping across the country over concerns about the cost and an underestimation of the risks. Some of the counties hardest hit by Hurricane Harvey in 2017, for example, such as Harris (which includes Houston), <a href="http://abcnews.go.com/Politics/wireStory/flood-policies-plunge-houston-years-harvey-49513946">have experienced significant declines</a>. </p>
<p>A more revealing – and <a href="https://bsa.nfipstat.fema.gov/reports/1011.htm">more difficult to ascertain</a> – stat is the share of homeowners in a disaster area who actually have flood insurance. In Harris County, for example, <a href="http://abcnews.go.com/US/consumer-flood-insurance-wake-hurricane-harvey/story?id=49535161">experts estimate</a> that only about 15 percent of homeowners were insured for floods – though the percentage is likely higher in areas near coastlines.</p>
<p>Real estate data company <a href="https://www.corelogic.com/news/wildfires-and-hurricane-related-floods-were-most-destructive-natural-hazards-in-2017.aspx">CoreLogic</a> estimated that approximately 75 percent of flood losses from Harvey were uninsured, a figure that rises to about 80 percent for Hurricane Irma.</p>
<p><iframe id="gj7WL" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/gj7WL/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>3. Why do people at great risk forgo insurance?</h2>
<p>A <a href="https://riskcenter.wharton.upenn.edu/publications/">number of factors</a> affect a homeowner’s decision to buy flood insurance – or not. </p>
<p>People who perceive that their exposure to floods is high are more likely to buy it, all other things equal. While a <a href="https://www.fema.gov/faq-details/Mandatory-Purchase-of-NFIP-Coverage/">mandatory purchase requirement</a> is intended to force owners of mortgaged homes in areas at high risk of flooding to buy insurance, <a href="https://www.bloomberg.com/news/articles/2017-09-13/hurricanes-highlight-failure-to-enforce-flood-insurance-rules">it’s estimated</a> that only about half of them do. </p>
<p>One reason might be that 43 percent of homeowners <a href="http://www.iii.org/sites/default/files/docs/pdf/pulse-wp-020217-final.pdf">incorrectly believe</a> that their homeowners’ insurance covers them for flood losses.</p>
<p>Other factors also come into play, such as a lack of information, the difficulty of calculating flood risk and the expectation that the government will provide disaster assistance that will fully cover a homeowner’s uninsured flood losses – which is in fact <a href="https://www.nytimes.com/2017/08/30/business/harvey-aid-sba-disaster-loans.html?mcubz=1&_r=0">rarely the case</a>.</p>
<h2>4. What does flood insurance cover?</h2>
<p>With a <a href="https://www.fema.gov/media-library-data/20130726-1620-20490-4648/f_679_summaryofcoverage_11_2012.pdf">National Flood Insurance Program policy</a>, a homeowner can purchase coverage on a dwelling up to US$250,000 and the contents of a home up to $100,000. It does not cover costs associated with “loss of use” of a home. </p>
<p>These limits have been in effect since 1994 and are no longer high enough to account for the increase in the replacement cost of homes and the actual cash value of their contents. As a result, some homeowners buy additional flood protection from private insurers to make up any shortfall. </p>
<h2>5. Why is the federal program underwater?</h2>
<p>The National Flood Insurance Program <a href="http://www.gao.gov/assets/690/684354.pdf">has faced considerable criticism</a> over its underwriting and pricing of policies, which have resulted in a substantial debt. Essentially, its premiums are not high enough to cover how much it pays out on claims and its other costs. </p>
<p>Part of the problem is that <a href="https://www.fema.gov/media-library-data/1382115115666-0fba8b9a68fef69d546513c6da105bbe/BW12_AgentWhat_to_Know_Say_Sect205_Sept2013.pdf">about 20 percent of the properties</a> the program insures pay a subsidized rate. But many other National Flood Insurance Program policyholders are also paying premiums <a href="http://www.foxbusiness.com/politics/2017/08/29/key-flood-insurance-underwriter-sinks-further-into-debt-as-harvey-slams-texas.html">substantially less</a> than what it costs to insure them because the rates do not adequately account for the catastrophic losses incurred during years when more major storms than normal strike, such as Katrina and Rita in 2005 and Sandy in 2012. </p>
<p>To show how much single storms can cost, the National Flood Insurance Program <a href="https://www.fema.gov/significant-flood-events">paid out $8.7 billion</a> to cover Harvey-related flood losses, $16.3 billion for Katrina and $8.8 billion for Sandy. </p>
<p>These inadequate rates also exacerbate the <a href="http://blogs.colgate.edu/economics/files/2014/09/McGee-2014-Moral-Hazard-and-the-National-Flood-Insurance-Program.pdf">moral hazard created by flood insurance</a>. People are more likely to buy, build or rebuild homes in flood-prone areas and have diminished incentives to invest in flood risk mitigation, such as by elevating their home, if they can buy insurance at below-cost rates. </p>
<p>Although Congress <a href="https://www.businessinsurance.com/article/20171027/NEWS06/912316843/Trump-signs-disaster-relief-bill-forgiving-16-billion-dollars-NFIP-debt">forgave</a> $16 billion in debt last year, the National Flood Insurance Program still owed <a href="https://www.treasury.gov/initiatives/fio/Documents/FACIFebruary2018_FEMA.pdf">$20.5 billion</a> to the U.S. Treasury as of February. </p>
<p><iframe id="hnDTa" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/hnDTa/6/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Hurricane Florence and other storms that may follow will substantially increase this debt – and may require more forgiveness.</p>
<h2>6. What can be done to fix the program?</h2>
<p>Legislative efforts to reform the National Flood Insurance Program to put it on firmer fiscal footing have produced mixed results. </p>
<p>The <a href="https://www.fema.gov/media-library/assets/documents/31946">Biggert-Waters Act of 2012</a> made a number of changes to the program, such as increasing premiums, to make it “<a href="https://www.fema.gov/media-library-data/20130726-1912-25045-9380/bw12_qa_04_2013.pdf">more financially stable</a>.” While that would have gone a long way to restore its fiscal solvency, an outcry from homeowners in high-risk areas led to the 2014 <a href="https://www.fema.gov/media-library/collections/414">Homeowners Flood Insurance Affordability Act</a>, which limited or rescinded many of the Biggert-Waters rate increases. </p>
<p>Currently, there is a <a href="https://www.congress.gov/bill/115th-congress/house-bill/2874/text">bill</a> in Congress that would fix some but not all of the problems with the program, such as by making it easier for private companies to sell their own policies and tightening the rules for properties that suffer repetitive losses.</p>
<p>But its prospects are dim to opposition from legislators concerned about some of its changes, particularly its rate increases and the repetitive loss provision.</p>
<p>Fundamentally, the program millions of Americans rely on to help them rebuild their lives after a devastating flood <a href="http://www.rff.org/research/collection/reforming-national-flood-insurance-program">needs to be fixed</a>. Its dire financial straits could be resolved by either making taxpayers foot more of the bill or increasing premiums closer to full-cost rates for most homeowners, while also raising total coverage levels.</p>
<p>At the same time, I believe the government needs to do more to convince or compel more at-risk homeowners to buy flood insurance – which would be harder to do if it were to raise rates. To me, this suggests that increasing taxpayer support for the the program will have to be part of the solution so that pricey premiums don’t become a deterrent to someone buying insurance. </p>
<p><em>This is an updated version of an <a href="https://theconversation.com/how-flood-insurance-works-6-questions-answered-83187">article</a> originally published on Sept. 7, 2017</em></p><img src="https://counter.theconversation.com/content/103058/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert W. Klein does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As Hurricane Florence is expected to pound the Carolinas with significant flooding, an insurance expert explains how the program designed to help the millions affected recover.Robert W. Klein, Director, Center for RMI Research, Associate Professor, Risk Management and Insurance, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/965292018-05-17T20:06:48Z2018-05-17T20:06:48ZLessons in resilience: what city planners can learn from Hobart’s floods<figure><img src="https://images.theconversation.com/files/218934/original/file-20180515-122928-1xrwbpl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A storm caused flooding in the CBD as it swept through Hobart.</span> <span class="attribution"><span class="source">Patrick Gee/The Mercury. Used with permission</span></span></figcaption></figure><p><a href="https://en.wikipedia.org/wiki/Hobart">Hobart</a> is a city known for its risk of catastrophic fire, such as the <a href="http://www.abc.net.au/news/2017-02-06/tasmanias-1967-black-tuesday-bushfires-explained/8241698">devastating wildfires</a> of 1897-98 and 1967. As the <a href="http://www.abc.net.au/news/2018-04-24/perth-rainfall-higher-than-melbourne-hobart-and-london/9688142">second-driest city</a> in Australia, until last week it was easy to forget that Hobart is also vulnerable to <a href="http://www.abc.net.au/news/2018-05-14/hobart-floods-declared-natural-disaster/9759794">serious flooding</a>. Like many cities, Hobart’s closeness to nature can be a double-edged sword – the hilly terrain affords spectacular views of <a href="https://goo.gl/images/2y8DuX">the mountain and the river</a>, but makes the city especially prone to wildfire and flash-flooding. </p>
<p>Hobart’s lack of preparedness for the scale and intensity of the May 2018 flood is also <a href="https://theconversation.com/planning-for-floods-and-fires-now-the-recipe-for-disaster-has-changed-11832">partly attributable</a> to the city’s postwar planning. So how can Hobart and cities like it become more resilient to <a href="https://theconversation.com/are-catastrophic-disasters-striking-more-often-83599">increasingly frequent natural disasters</a>?</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/n_T_gZYe0hI?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Flash flooding turns the city of Hobart into a disaster zone.</span></figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/higher-density-in-a-flood-zone-heres-a-way-to-do-it-and-reduce-the-risks-86608">Higher density in a flood zone? Here's a way to do it and reduce the risks</a>
</strong>
</em>
</p>
<hr>
<h2>A history of vulnerability and risk</h2>
<p>Like it or not, disasters are part of the urban landscape. So too is social inequality. And the two can be mutually reinforcing – socially isolated and disadvantaged residents are often less able to cope when disaster strikes. They may, for example, lack insurance or be less mobile. </p>
<p>Social cohesion is a key element in community disaster recovery, helping cities “bounce back” after an event. But <a href="https://theconversation.com/floods-dont-occur-randomly-so-why-do-we-still-plan-as-if-they-do-93371">good land use planning is also important</a> to avoid creating future problems.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-healthy-environment-shouldnt-just-be-for-the-rich-10439">A healthy environment shouldn't just be for the rich</a>
</strong>
</em>
</p>
<hr>
<h2>Planning (non)-responses</h2>
<p>Like the rest of Australia, historically <a href="https://theconversation.com/our-legacy-of-liveable-cities-wont-last-without-a-visionary-response-to-growth-93729">city planning</a> in Hobart was characterised by disconnection from nature. Creeks and streams were filled in, built over or walled off (taming nature), creating risks of <a href="https://global.nature.org/content/natures-solutions-for-infrastructure-problems">catastrophic failure in unexpected conditions</a>. This approach also overlooked the important <a href="https://theconversation.com/how-green-roofs-can-protect-city-streets-from-flooding-82679">ecological functions</a> of watercourses. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=573&fit=crop&dpr=1 754w, https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=573&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/218940/original/file-20180515-122935-1g0s8mm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=573&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Hobart Rivulet, circa 1900, photographer unknown.</span>
<span class="attribution"><span class="source">Tasmania Archive and Heritage Office, NS1013/1/344</span></span>
</figcaption>
</figure>
<p>The recent storm event was not the worst on record. In the 1960s, the city experienced <a href="http://www.bom.gov.au/tas/flood/flood_history/flood_history.shtml">very severe flooding</a>. There were also several bad floods in the 1930s. But Hobart has changed since then. </p>
<p>The city has grown significantly. As houses, roads and buildings increase the paved area, Hobart has lost some of its green cover, which <a href="https://theconversation.com/chinas-sponge-cities-aim-to-re-use-70-of-rainwater-heres-how-83327">acts like a sponge</a>. And in recent times the city has had an <a href="http://www.abc.net.au/news/2018-01-29/tasmania-top-of-the-pops-for-population-growth,-report-finds/9370524">influx of residents</a> who lack experience with the city’s natural hazards.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=352&fit=crop&dpr=1 600w, https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=352&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=352&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=442&fit=crop&dpr=1 754w, https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=442&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/218744/original/file-20180514-178740-dv8mhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=442&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Hobart Rivulet in flood, circa 1930, Collins Street and Market Place, photographer unknown.</span>
<span class="attribution"><span class="source">Tasmanian Archive and Heritage Office</span></span>
</figcaption>
</figure>
<p>Over the decades, the record of flood events has been partly translated into planning knowledge. For instance, Hobart’s interim town planning scheme has overlay maps indicating places prone to flooding, landslide and wildfire. </p>
<p>Planners now also apply <a href="https://theconversation.com/how-your-garden-could-help-stop-your-city-flooding-42473">water-sensitive urban design</a> principles. These include protecting floodplains from development, limiting the development of very steep land, and restricting land uses on flood-prone sites (e.g. to recreation areas).</p>
<p>Unfortunately for Hobart’s residents, many of these principles were devised after much of the city was already built. Planning is less effective at retrospectively requiring that buildings are upgraded or even relocated. </p>
<p>Given Australia’s system of property rights, planners can seldom <a href="https://www.sciencedirect.com/science/article/pii/S2212420914000028">relocate entire communities</a> out of harm’s way – the <a href="https://www.tandfonline.com/doi/abs/10.1080/01944363.2014.976586">response to the Grantham floods</a> in Queensland has been an exception. The default approach has been to leave it to the insurance system to manage risk and recovery.</p>
<h2>Whose responsibility?</h2>
<p>One of the drivers for the lack of policy on minimising disaster risks in Tasmania is the state government’s aim to reduce government involvement in risk management and <a href="http://www.dpac.tas.gov.au/divisions/osem/mitigating_natural_hazards">shift responsibility onto households and businesses</a>. This is placing a greater emphasis on disaster “self-help” through insurance and risk reduction – such as clearing firebreaks, cleaning gutters and so on.</p>
<p>We assume that if a flood or fire affects residents, then insurance will allow them to get back on their feet. However, <a href="https://www.vic.gov.au/news/insure-it-it-s-worth-it.html">half of residents may be underinsured</a>, according to Victorian government estimates. <a href="http://journals.sagepub.com/doi/abs/10.1177/0042098017736257">The reasons</a> include being unable to afford insurance or deciding they have more pressing financial priorities. </p>
<p>Insurance can also be inadequate because it is hard to estimate replacement costs. These costs may soar after a disaster. The Hobart repair bill has already <a href="http://www.abc.net.au/news/2018-05-14/hobart-floods-insurance-claims-come-pouring-in/9758208">climbed above A$20 million</a>, and residents may discover their policy is inadequate. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=560&fit=crop&dpr=1 754w, https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=560&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/219317/original/file-20180517-155607-1cj65ui.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=560&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Even if residents have insurance – and many don’t – it may not be enough to cover their costs in the disaster recovery phase.</span>
<span class="attribution"><span class="source">Twitter</span></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/properties-under-fire-why-so-many-australians-are-inadequately-insured-against-disaster-50588">Properties under fire: why so many Australians are inadequately insured against disaster</a>
</strong>
</em>
</p>
<hr>
<h2>What can planners learn from this?</h2>
<p>Even though Hobart avoided loss of life in the recent floods, we might not be so lucky next time. Governments have a key role to play in getting the balance right between regional and large-scale infrastructure planning and self-help at the household level. Focusing on self-help at the expense of planning and broader-scale mitigation can increase a city’s vulnerability. </p>
<p>We need to <a href="https://theconversation.com/moving-grantham-relocating-flood-prone-towns-is-nothing-new-4878">learn from other places</a>. Key actions should follow the principle of <a href="https://www.sciencedirect.com/science/article/pii/S016920461100079X">safe failure</a> and may include:</p>
<ul>
<li><p>better communication of hazard mapping and using town planning scheme overlays to enforce development restrictions</p></li>
<li><p>devising state policies for watershed, coastal and bushland management to reduce risks at regional and watershed scales, which includes protecting green space and <a href="https://theconversation.com/cant-see-the-water-through-the-trees-a-better-plan-to-reduce-floods-5719">restoring floodplains</a></p></li>
<li><p>identifying opportunities for “multifunctionality” – for example, a cricket ground is also a flood retention basin</p></li>
<li><p>strengthening social cohesion and reducing inequality, so communities can bounce back faster</p></li>
<li><p>identifying properties in harm’s way and using new building codes, compulsory acquisition or even managed relocation to reduce hazard exposure</p></li>
<li><p>siting critical infrastructure, such as hospitals and electricity substations, away from floodplains and building in redundancy – backup infrastructure, for example.</p></li>
</ul>
<p>Not all these solutions can be implemented immediately. Paradoxically, some actions – planting trees, for instance – could <a href="https://theconversation.com/low-flammability-plants-could-help-our-homes-survive-bushfires-53870">increase other risks, such as bushfires</a>. </p>
<p>In cities like Hobart, by learning from past mistakes and experimenting with alternative solutions, good planning can avoid putting people in harm’s way in the future.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/natural-hazard-risk-is-it-just-going-to-get-worse-or-can-we-do-something-about-it-84286">Natural hazard risk: is it just going to get worse or can we do something about it?</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/96529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Byrne receives funding from the Australian Research Council for research on (i) climate change and social innovation and (ii) green space and health. He is a member of the Planning Institute Australia, Institute of Australian Geographers and Association of American Geographers. Jason donates to environmental groups (e.g. Australian Conservation Foundation). He also provides research consultancy services to state and local government.</span></em></p><p class="fine-print"><em><span>Dave Kendal receives funding from the Australian Research Council, the Royal Botanic Gardens Melbourne, the federal Environment Department through the Clean Air and Urban Landscapes Hub of the National Environmental Science Program, and the Glenelg-Hopkins and Corangamite Catchment Management Authorities.</span></em></p><p class="fine-print"><em><span>Emma Pharo is a member of the Planning Institute of Australia and sits on the policy sub-committee in Tasmania. She is a member of a City of Hobart transport planning committee and an active member of Bicycle Network Tasmania. </span></em></p><p class="fine-print"><em><span>Kate Booth receives funding from the Australian Research Council (DP170100096) and collaborates on Tourism Tracer, partly funded by Tasmanian Government (State Growth), Tourism Industry Council Tasmania and Federal Group. She is a member of the Planning Institute of Australia and sat on its Tasmanian Committee until December 2017. She also donates to planning- and environment-related non-government organisations. </span></em></p>Managing flood risk is not just ‘good planning’; it requires commitment to resilient cities by land developers, politicians and communities. Effective response means learning from mistakes.Jason Byrne, Professor of Human Geography and Planning, University of TasmaniaDave Kendal, Senior Lecturer in Environmental Management, University of TasmaniaEmma Pharo, Senior Lecturer, Geography and Environmental Studies, University of TasmaniaKate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/831872017-09-07T16:16:53Z2017-09-07T16:16:53ZHow flood insurance works: 6 questions answered<p><em>Editor’s note: <a href="https://www.washingtonpost.com/news/capital-weather-gang/wp/2017/08/31/harvey-is-a-1000-year-flood-event-unprecedented-in-scale/">Hurricane Harvey</a> dumped up to 50 inches of rain on parts of Texas and Louisiana last month. Meanwhile, Hurricane Irma is bearing down on Florida, which will also likely cause substantial flooding. Homeowners generally rely on insurance provided by the federal government to cover the costs of rebuilding their lives after a flood. We asked an insurance expert to explain the government program and its challenges.</em></p>
<h2>1. What is flood insurance?</h2>
<p>Homeowners’ insurance does not cover damage to a home caused by flooding. A homeowner must have a separate policy to cover flood-related losses, defined as water traveling along or under the ground.</p>
<p>Most such policies are underwritten by the <a href="https://www.fema.gov/national-flood-insurance-program">National Flood Insurance Program</a>, which is part of the Federal Emergency Management Agency. The National Flood Insurance Program was established in 1968 to address the lack of availability of flood insurance in the private market and reduce the demand for federal disaster assistance for uninsured flood losses. Another purpose was to integrate flood insurance with floodplain management, which includes such things as adopting and enforcing stricter building codes, retaining or restoring wetlands to absorb floodwaters and requiring or encouraging homeowners to make their homes more flood-resistant. </p>
<p>The National Flood Insurance Program’s activities are funded largely by the premiums and fees paid by its policyholders, supplemented by a small amount of general funds to help pay for flood risk mapping. Because the National Flood Insurance Program serves the public interest, some believe that more of its funding should be borne by taxpayers.</p>
<p>Homeowners can purchase a federal flood policy directly from the National Flood Insurance Program or through a private insurer. Separately, some private insurers sell their own flood policies on a limited basis for properties that are overcharged by the National Flood Insurance Program.</p>
<h2>2. How many American homeowners have flood insurance?</h2>
<p>It is difficult to determine exactly how many homeowners have flood insurance. </p>
<p>The National Flood Insurance Program <a href="https://www.fema.gov/policy-claim-statistics-flood-insurance">had just under five million policies in force</a> as of June 30. Of these policies, approximately 68 percent were on single-family homes and 21 percent on condo units. There is no source on how many private flood policies are in force, but my sense is that it is very small relative to the number of National Flood Insurance Program policies.</p>
<p>In recent years, the number of such policies has been dropping across the country. Some of the counties hardest hit by Harvey, for example, such as Harris (which includes Houston), <a href="http://abcnews.go.com/Politics/wireStory/flood-policies-plunge-houston-years-harvey-49513946">have experienced significant declines</a>.</p>
<p>A more revealing – and <a href="https://bsa.nfipstat.fema.gov/reports/1011.htm">more difficult to ascertain</a> – stat is the share of homeowners in a disaster area who actually have flood insurance. In Harris County, for example, <a href="http://abcnews.go.com/US/consumer-flood-insurance-wake-hurricane-harvey/story?id=49535161">experts estimate</a> that only about 15 percent of homeowners are insured for floods – though the percentage should be higher in areas near coastlines.</p>
<p>Real estate data company <a href="http://www.corelogic.com/about-us/news/media-advisory-corelogic-analysis-estimates-total-residential-insured-and-uninsured-flood-loss-for-hurricane-harvey.aspx">CoreLogic</a> estimates that approximately 70 percent of flood losses from Harvey will be uninsured.</p>
<p></p><hr><p></p>
<p><iframe id="HABt3" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/HABt3/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p></p><hr><p></p>
<h2>3. Why do people at great risk of flooding forgo insurance?</h2>
<p>A <a href="https://riskcenter.wharton.upenn.edu/publications/">number of factors</a> affect a homeowner’s decision to buy flood insurance (or not). </p>
<p>People who perceive that their exposure to floods is high are more likely to buy it, all other things equal. And the <a href="https://www.fema.gov/faq-details/Mandatory-Purchase-of-NFIP-Coverage/">mandatory purchase requirement</a> forces owners of mortgaged homes located in Special Flood Hazard Areas – areas at high risk for flooding – to buy insurance. </p>
<p>However, 43 percent of homeowners <a href="http://www.iii.org/sites/default/files/docs/pdf/pulse-wp-020217-final.pdf">incorrectly believe</a> that their homeowners’ insurance covers them for flood losses. </p>
<p>Other factors also come into play, such as a lack of information, the difficulty of calculating flood risk and the expectation that the government will provide disaster assistance – which is <a href="https://www.nytimes.com/2017/08/30/business/harvey-aid-sba-disaster-loans.html?mcubz=1&_r=0">rarely the case</a>.</p>
<h2>4. What does flood insurance cover?</h2>
<p>With a <a href="https://www.fema.gov/media-library-data/20130726-1620-20490-4648/f_679_summaryofcoverage_11_2012.pdf">National Flood Insurance Program policy</a>, a homeowner can purchase coverage on a dwelling up to US$250,000 and the contents of a home up to $100,000. It does not cover costs associated with “loss of use” of a home. </p>
<p>The National Flood Insurance Program policy limits have been in effect since 1994 and need to be updated to account for the increase in the replacement cost of homes and the actual cash value of their contents. Although not the best measure of the replacement cost, the median price of new homes sold in the U.S. <a href="https://fred.stlouisfed.org/series/MSPNHSUS">has soared 132 percent</a> since 1994.</p>
<p>Some homeowners buy additional flood protection from private insurers to make up any shortfall. </p>
<h2>5. Why is the National Flood Insurance Program underwater?</h2>
<p>The National Flood Insurance Program <a href="http://www.gao.gov/assets/690/684354.pdf">has faced considerable criticism</a> over its underwriting and pricing policies, which have resulted in a substantial debt. Essentially, its premiums are not high enough to cover how much it pays out on claims and its other costs. </p>
<p>Part of the problem is that <a href="https://www.fema.gov/media-library-data/1382115115666-0fba8b9a68fef69d546513c6da105bbe/BW12_AgentWhat_to_Know_Say_Sect205_Sept2013.pdf">about 20 percent of the properties</a> the program insures pay a subsidized rate. But many other National Flood Insurance Program policyholders are also paying premiums <a href="http://www.foxbusiness.com/politics/2017/08/29/key-flood-insurance-underwriter-sinks-further-into-debt-as-harvey-slams-texas.html">substantially less</a> than what it costs to insure them because the rates do not adequately account for the catastrophic losses incurred during years when more major storms than normal strike, such as Katrina and Rita in 2005 and Sandy in 2012. As a result, the National Flood Insurance Program owes an accumulated debt of $25 billion to the U.S. Treasury.</p>
<p></p><hr><p></p>
<p><iframe id="hnDTa" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/hnDTa/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p></p><hr><p></p>
<p>Hurricane Harvey (and potentially other storms such as Irma that may follow) will substantially increase this debt. <a href="http://www.corelogic.com/about-us/news/media-advisory-corelogic-analysis-estimates-total-residential-insured-and-uninsured-flood-loss-for-hurricane-harvey.aspx">CoreLogic estimates</a> that National Flood Insurance Program-insured flood losses from Harvey alone will be $6 billion to $9 billion.</p>
<p>In the short term, Congress will have to increase the National Flood Insurance Program’s borrowing authority for it to pay the claims that will result from Harvey and other storms this year. Lawmakers could make a general fund appropriation to forgive all or a portion of the National Flood Insurance Program’s debt, but it has shown no interest in doing so. </p>
<p>These inadequate rates also exacerbate the <a href="http://blogs.colgate.edu/economics/files/2014/09/McGee-2014-Moral-Hazard-and-the-National-Flood-Insurance-Program.pdf">moral hazard created by flood insurance</a>. People are more likely to buy, build or rebuild homes in flood-prone areas and have diminished incentives to invest in flood risk mitigation, such as by elevating their home, if they can buy insurance at below-cost rates. </p>
<h2>6. What can be done to fix the program?</h2>
<p>Legislative efforts to reform the National Flood Insurance Program to put it on firmer fiscal footing have produced mixed results. </p>
<p>The <a href="https://www.fema.gov/media-library/assets/documents/31946">Biggert-Waters Act of 2012</a> made a number of changes to the program, such as increasing premiums and other changes to make it “<a href="https://www.fema.gov/media-library-data/20130726-1912-25045-9380/bw12_qa_04_2013.pdf">more financially stable</a>,” that would have gone a long way to restore its fiscal solvency. However, an outcry from homeowners in high-risk areas such as coastal Florida led to the <a href="https://www.fema.gov/media-library/collections/414">Homeowners Flood Insurance Affordability Act</a>, passed in 2014, that limited or rescinded many of the Biggert-Waters rate increases. </p>
<p>Fundamentally, the program millions of Americans rely on to help them rebuild their lives after a devastating flood <a href="http://www.rff.org/research/collection/reforming-national-flood-insurance-program">needs to be fixed</a>. Its dire financial straits could be resolved by either making taxpayers foot more of the bill or increasing premiums closer to full-cost rates for most homeowners, while also raising total coverage levels.</p>
<p>At the same time, the government needs to do more to convince or compel more at-risk homeowners to buy flood insurance – which would be harder to do if it were to raise rates. To me, this suggests that increasing taxpayer support for the NFIP will have to be part of the solution so that pricey premiums don’t become a deterrent to someone buying insurance. </p>
<p>With the likelihood of much more flooding in the coming weeks and years, more needs to be done to mitigate the risk, including producing more accurate and timely maps of the flood risk in various areas, especially high-risk areas, educating people about what those risks really mean and helping relocate homeowners as necessary.</p><img src="https://counter.theconversation.com/content/83187/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert W. Klein does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The federal government created a program in 1968 to insure homes in the US from flooding, yet few of the houses hammered by Harvey’s record rainfall were covered.Robert W. Klein, Professor Emeritus of Risk Management and Insurance, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/831842017-09-04T23:24:41Z2017-09-04T23:24:41ZWhat victims of Hurricane Harvey can learn from Katrina as rebuilding begins<p>Floodwaters in parts of Houston are beginning to recede after nearly a week of rain from Hurricane Harvey. The emphasis for many flood victims will now shift from survival to recovery. </p>
<p>While many economists are trying to determine the disaster’s overall toll – <a href="http://www.latimes.com/business/la-fi-harvey-economic-toll-20170901-story.html">certain to be significant</a> – a topic less explored is the financial impact on Harvey’s victims. </p>
<p>In <a href="https://www.aeaweb.org/articles?id=10.1257/pol.20140273">recent research</a> I co-authored with <a href="https://www.chicagofed.org/people/h/hartley-daniel">economist Daniel Hartley</a>, we provide some of the first victim-level evidence of the financial impact of a costly flood. Specifically, we examined financial data for victims of Hurricane Katrina in 2005. </p>
<h2>Flooding’s toll</h2>
<p>Since Hurricane Harvey made landfall near Houston on August 25, rain totals <a href="https://www.washingtonpost.com/news/capital-weather-gang/wp/2017/08/31/harvey-is-a-1000-year-flood-event-unprecedented-in-scale/?utm_term=.d6ea4ce931db">have topped 50 inches</a> in some locations.</p>
<p>The result has been untold human suffering. At least <a href="http://www.houstonchronicle.com/news/houston-weather/hurricaneharvey/article/Harvey-Aftermath-Houston-police-officer-dies-19-12159139.php">60 lives</a> have been lost, and <a href="http://www.latimes.com/nation/la-na-texas-harvey-20170901-story.html">tens of thousands</a> had to evacuate their homes. Property damage may surpass that of Katrina, which up until now has been the most costly hurricane to hit the U.S., with an estimated price tag of <a href="http://www.nhc.noaa.gov/data/tcr/AL122005_Katrina.pdf">US$108 billion</a>. </p>
<p>That storm flooded <a href="http://www.tulane.edu/%7Esanelson/New_Orleans_and_Hurricanes/overviewofleveefailures.pdf">about 85 percent</a> of New Orleans, killed at least <a href="http://www.nhc.noaa.gov/data/tcr/AL122005_Katrina.pdf">1,833 people</a> and displaced an estimated <a href="http://projects.ce.berkeley.edu/neworleans/">450,000</a> residents.</p>
<p>Katrina is only one of dozens of <a href="http://create.usc.edu/sites/default/files/publications/policytenureundertheu.s.nationalfloodinsuranceprogramnf_0.pdf">devastating hurricanes</a> that have wrought destruction along the southeast and eastern coasts of the United States in recent decades. Yet despite the frequency of such disasters, little has been known until recently about the financial toll on flood victims. </p>
<h2>Studying the financial impact</h2>
<p>In <a href="https://www.aeaweb.org/articles?id=10.1257/pol.20140273">our study</a>, we measured the financial impact from Katrina using <a href="https://www.newyorkfed.org/research/staff_reports/sr479.html">credit agency data</a> on a random sample of U.S. residents. We zeroed in on 16,000 people living in New Orleans at the time of Katrina and tracked their credit histories three years before and after the storm. </p>
<p>The information is quarterly and includes all reported debts, including home loans, credit cards and student loans. Debt is a good proxy for financial impact because a change in borrowing is often how people manage an unexpected shock, such as a disaster. </p>
<p>Although the data are anonymized, their approximate location was included in the data based on the “<a href="http://proximityone.com/geo_blocks.htm">census block</a>” of residence, which in New Orleans is a couple of city blocks in size on average. </p>
<p>We divided residents in our sample into a nonflooded group and four flooded groups based on the <a href="http://www.noaanews.noaa.gov/stories2005/s2503.htm">depth of water</a> in their block, which ranged from less than a foot for the least-flooded to about eight for the most.</p>
<p>The data showed that prior to Katrina, total debt levels for nonflooded, least-flooded and most-flooded residents were on a similar upward trajectory. The overall level of debt was highest for residents in the nonflooded group, while that of residents in the other two groups were nearly identical. </p>
<p>What we found was that average debt for those who experienced the most flooding plunged within a few months of Katrina, falling about 25 percent. Meanwhile those who had the least flooding saw their debt briefly level off. Debt of those who didn’t encounter any flooding, on the other hand, continued to rise unabated. </p>
<p>Beginning about a year after Katrina, the rate of debt accumulation for all three groups returned to the pre-storm trend. </p>
<p></p><hr><p></p>
<p><iframe id="Ffivw" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/Ffivw/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p></p><hr><p></p>
<h2>Breaking down the debts</h2>
<p>Breaking down the data into specific types of borrowing, we found that it was primarily a sharp drop in home loan debt that accounted for the overall change. </p>
<p>After controlling for several socioeconomic and demographic factors and pre-Katrina flood risk, we saw that home debt decreased by about $12,000 for the most-flooded residents relative to those who experienced none.</p>
<p>The credit agency data indicated that apart from this reduction, flooding from Katrina had a modest and relatively short-lived negative impact on the personal finances of the most-flooded residents.</p>
<p>Their average credit card debt temporarily increased about $500 (15 percent) but was paid back within a year, while auto and student loan debt didn’t change at all. Ninety-day bill delinquency rates rose about 10 percent for a quarter, and credit scores declined about 1 percent for two years.</p>
<p>The relatively modest and short-lived financial impact of Katrina on its victims is supported by another <a href="http://deryugina.com/2017-05-11-hurricane_katrina_draft.pdf">recent study</a> based on tax return data. It found that within a few years of the storm, the income of flood victims was higher than that of filers living outside of New Orleans with similar pre-Katrina financial histories. </p>
<p>An important caveat to both studies is that neither includes information on subpopulations that may be most vulnerable to natural disasters, such as those without a credit history or who don’t file federal income taxes. Residents in both groups were more likely to be unemployed before the flood and have fewer financial resources. </p>
<h2>Role of flood insurance</h2>
<p>Homeowner decisions to use flood insurance to pay down home loan debt accounts for most of the reduction. Around 25 percent of victims with a home loan in the most-flooded group paid it off within six months of Katrina. </p>
<p>Using flood insurance to pay off a home loan made financial sense for some. About <a href="http://levees.org/wp-content/uploads/2011/04/After-Katrina-Pundits-Criticized-New-Orleans.pdf">two-thirds</a> of homeowners in New Orleans had such insurance. </p>
<p>Assuming a home is fully insured, a flood insurance check would cover the cost to rebuild it. But in many neighborhoods of New Orleans prior to Katrina, <a href="https://www.aeaweb.org/articles?id=10.1257/jep.22.4.135">reconstruction costs</a> of homes exceeded their worth, in which case it made sense to purchase a similar home elsewhere at a lower cost rather than rebuild. When this occurred, any existing mortgage debt had to be paid off first.</p>
<p>Some homeowners, however, appear to have made this decision to pay off mortgage debt due to pressure from lenders, which is both <a href="http://www.uphelp.org/sites/default/files/disaster/katrina_articles/katrina_mortgage.html">illegal</a> and probably a poor financial decision. We found evidence consistent with <a href="http://thelensnola.org/2011/12/23/kisa-holmes-six-years-later/">accounts</a> that lenders, particularly national banks without a strong local presence, pressured some homeowners to pay off mortgages using flood insurance money.</p>
<h2>What it means for Harvey victims</h2>
<p>So what does the experience of Katrina’s victims mean for the financial recovery of those flooded by Harvey?</p>
<p>First, the collective safety net provided by flood insurance, government assistance, nonprofit aid and personal savings encouraged a relatively quick financial recovery – as measured by debt levels, indicators of financial distress and income – for even the worst-hit victims of Katrina. </p>
<p>Flood insurance played a particularly important role. <a href="http://www.iii.org/fact-statistic/flood-insurance">More than $16 billion in flood insurance was paid out</a>, or $97,141 per claim. By comparison, direct federal assistance to victims for rebuilding was capped at <a href="http://www.gao.gov/products/GAO-06-844T">$15,700</a>. Other assistance approved by Congress didn’t arrive until <a href="http://www.prnewswire.com/news-releases/the-road-home-opens-10-housing-assistance-centers-statewide-louisiana-housing-recovery-program-underway-56216082.html">over a year</a> later.</p>
<p>That won’t be of much comfort to the residents of Houston, however, where flood insurance coverage rates <a href="http://www.nola.com/hurricane/index.ssf/2017/08/flood_insurance_in_houston_plu.html">have dropped 9 percent</a> in the past five years. <a href="https://www.washingtonpost.com/news/wonk/wp/2017/08/29/where-harvey-is-hitting-hardest-four-out-of-five-homeowners-lack-flood-insurance/?utm_term=.33ef4b65bb6b">Only 17 percent of homeowners</a> in the counties most affected by Harvey have policies. </p>
<p>In order for Harvey victims to recovery financially at a pace similar to Katrina’s, per-person direct government assistance will likely need to be larger. President Trump <a href="http://www.houstonchronicle.com/houston/article/Houston-heads-into-weekend-post-Harvey-Trump-12168379.php">has reportedly requested</a> $7.9 billion so far.</p>
<p>Second, the Houston metro area <a href="http://www.houstonpublicmedia.org/articles/news/2016/03/24/142556/census-numbers-are-out-greater-houston-area-has-largest-population-gain/">has experienced</a> significant population growth and increasing property values. Flooded homeowners who have insurance are likely to be better off financially if they use their checks to rebuild rather than paying off home loans and walking away. Houston residents should be wary of banks that suggest otherwise.</p>
<h2>Value of flood insurance</h2>
<p>We know that there will be devastating future floods in Houston and elsewhere, and <a href="https://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_full_report.pdf">climate change</a> is expected to increase their frequency. </p>
<p>The <a href="https://www.fema.gov/national-flood-insurance-program">National Flood Insurance Program</a> was created in 1968 to help protect Americans against the risk of flooding without requiring extensive taxpayer-financed federal disaster aid. But insufficient insurance coverage, like in Houston, drastically limits its effectiveness. </p>
<p>If we want to avoid generous disaster bailouts in the future, policy changes to the program are necessary: for example, by ensuring more people who choose to live in <a href="https://www.nature.com/articles/s41598-017-09269-z">areas at greatest risk</a> of flooding <a href="https://www.fema.gov/faq-details/Mandatory-Purchase-of-NFIP-Coverage">are compelled</a> to buy insurance. </p>
<p><a href="https://www.usatoday.com/story/news/politics/2017/09/01/cbo-flood-insurance-program-shortfall/625460001">Strengthening</a> the insurance program is one way to help ensure residents of Houston and other coastal cities are prepared for the many floods to come.</p><img src="https://counter.theconversation.com/content/83184/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin Gallagher does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Researchers examined credit data on the victims of Hurricane Katrina to understand how the disaster affected their personal finances, revealing important lessons for those hurt by Harvey.Justin Gallagher, Assistant Professor of Economics, Case Western Reserve UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/810122017-08-28T17:48:57Z2017-08-28T17:48:57ZAmericans who live far from coasts should also be worried about flooding<figure><img src="https://images.theconversation.com/files/183528/original/file-20170827-27532-87za4z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Two people walk down a flooded section of Interstate 610 in Houston in floodwaters from Tropical Storm Harvey on Sunday, Aug. 27, 2017. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/APTOPIX-Harvey/536472b9e91446d68c240c3a3fc92fdb/4/0">AP Photo/David J. Phillip</a></span></figcaption></figure><p>Catastrophic flooding in Houston from Hurricane Harvey is the latest reminder that floods <a href="http://www.nssl.noaa.gov/education/svrwx101/floods/">kill more people in the United States</a> than any other type of natural disaster and are the <a href="http://reliefweb.int/report/world/human-cost-natural-disasters-2015-global-perspective">most common natural disaster worldwide</a>. Many communities along U.S. coastlines have begun to take heed and have slowed development in coastal flood zones. The bad news, as Harvey shows, is that inland communities are also at risk – and in some, development in flood zones is increasing.</p>
<p>With post-doctoral research associate <a href="http://www.socialsciences.hawaii.edu/profile/index.cfm?email=yi.qiang@hawaii.edu">Yi Qiang</a> and graduate students, I recently studied <a href="http://dx.doi.org/10.1080/24694452.2017.1320214">development patterns in the United States from 2001 to 2011</a>. We found that while new urban development in flood zones near coasts has generally declined, it has grown in inland counties. This is a worrisome trend. It implies that people who have experienced flooding on the coast migrate inland, but may not realize that they are still vulnerable if they relocate to an inland flood zone. </p>
<p>That’s what we have seen firsthand here in Louisiana. Thousands of people fled New Orleans after Hurricane Katrina in August 2005 and settled 80 miles inland in Baton Rouge. A decade later, many of these same people lost everything again when <a href="https://www.nola.com/traffic/index.ssf/2016/08/baton_rouge_flooding_ptsd.html">a 500-year flood event</a> struck Baton Rouge in August 2016. </p>
<p>Climate change effects, such as sea level rise and potentially more <a href="https://theconversation.com/climate-change-and-hurricane-katrina-what-have-we-learned-46297">extreme weather</a>, are increasing the risk of flooding, hurricanes and storm surges in coastal areas. Some communities are considering <a href="https://www.bloomberg.com/view/articles/2016-08-22/nj-s-blue-acres-program-a-new-strategy-for-climate-change">moving coastal populations inland</a> to protect them. However, our research shows that people should be very careful about moving inland. They can still face flood hazards if their property is located in a high-risk flood zone. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/183529/original/file-20170827-27579-ftyg8k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Damage from floods in Boulder County, Colorado, September 2013.</span>
<span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/5/5a/Jamestown%2C_Colorado_Cut_Off_by_2013_Colorado_Floods.jpg">Steve Zumwalt/FEMA</a></span>
</figcaption>
</figure>
<h2>Not just a coastal issue</h2>
<p>Flooding can happen wherever large rainstorms stall over an area, as we have seen in Boulder, Colorado in 2013; in Texas and Louisiana in 2016; and over Houston now. However, if communities take steps to reduce flood risk, they can mitigate the danger to people and property.</p>
<p>When we assess flood risk in a given location, we consider three questions. </p>
<ul>
<li>Hazard: How likely is a flood event?</li>
<li>Exposure: How many people and physical assets are located there?</li>
<li>Vulnerability: Do people have the capacity to deal with the event? </li>
</ul>
<p>Flood risk is the product of these three elements. </p>
<p>We can decrease flood risk by reducing any of the three elements. For example, communities can reduce hazard by building flood control structures, such as dams and levees. They can use laws and policies, such as land use controls, to reduce exposure by steering housing development away from flood zones. And they can make people and property less vulnerable through other measures, such as elevating houses and developing better flood warning systems and emergency preparedness plans. </p>
<p>How can people learn about flood risks where they live? The <a href="https://www.fema.gov/">Federal Emergency Management Agency</a> has created <a href="https://msc.fema.gov/portal/search">flood zone maps</a> for most parts of the United States. The maps are based on models that consider factors such as elevation, average rainfall and whether a location is near a river or lake that could overflow. </p>
<p>FEMA maps classify <a href="https://www.fema.gov/flood-zones">flood zones</a> into three categories: high-risk, moderate-low risk and undetermined. High-risk zones have at least a 1 percent chance of being inundated by flood in any given year. These areas are also called base flood or 100-year flood zones. </p>
<p>To obtain a federally insured mortgage on property in a 100-year flood zone, buyers are required to have flood insurance. This policy is designed to make people less vulnerable in the event of a flood, but it increases the cost of home ownership. As a result, flood zone designations can be very contentious. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/EACkiMRT0pc?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">100-year flood zones are based on a combination of statistics, hydrogeology and society’s tolerance for risk.</span></figcaption>
</figure>
<h2>Moving into harm’s way</h2>
<p>We undertook this study because we wanted to develop a clear baseline showing how Americans’ exposure to flood hazards has changed over the past decade. To assess levels of exposure to flood hazards nationwide, we compiled urban development, flood zone and census data and overlaid them on a county map of the nation.</p>
<p>Overall, we estimated that as of 2011, more than 25 million Americans lived in flood zones. We also found that inland communities were less responsive to flood hazards than coastal communities and were doing a poorer job of steering development out of flood-prone areas. </p>
<p>The three U.S. counties with the largest concentrations of people living in flood zones are located on the Gulf of Mexico. They are Cameron Parish, Louisiana (population 6,401, with 93.6 percent in flood zones); Monroe County, Florida (population 66,804, with 91.4 percent in flood zones); and Galveston County, Texas (population 241,204, with 82.8 percent in flood zones). </p>
<p>These are all coastal communities, where flood risks should be well-known to all residents. But we also found inland counties where the share of the total population living in flood zones increased over the decade we examined. A number of those with the largest increases are bordered by rivers, such as Marshall County in western Kentucky, which sits between Kentucky Lake and the Ohio River. We also identified several hot spots where urban development has increased in coastal flood zones, including New York City and Miami. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/183530/original/file-20170827-27564-9nlihg.gif?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Heavy rainfall from Tropical Storm Harvey is forecast to reach hundreds of miles inland.</span>
<span class="attribution"><a class="source" href="http://www.nhc.noaa.gov/storm_graphics/AT09/refresh/AL0917WPCQPF+gif/153129WPCQPF_sm.gif">National Weather Service</a></span>
</figcaption>
</figure>
<h2>Reducing exposure now</h2>
<p>This alarming trend points to a need for more awareness, education and communication about flood risk, especially in inland counties. More affordable housing in nonflood zones and strategies to mitigate floods are also needed, especially inland. </p>
<p>Why would people move to inland flood zone areas? Some may be unaware of the risk. Others may plan to adapt through steps such as elevating their houses or buying flood insurance. Still other may accept the risk because they want to be closer to relatives or workplaces, or for other cultural, political or institutional reasons. </p>
<p>Our analysis has pinpointed a number of regions of concern. The next step is to produce in-depth analyses of these regions, in order to understand why people are locating in flood zones there, and to devise local strategies to reduce overall U.S. flood risks. Climate change, <a href="https://water.usgs.gov/ogw/subsidence.html">land subsidence</a> or sinking, and construction of new levees and dams will change long-term flood exposure in these areas over time. Therefore, local governments, mortgage lenders and homeowners should review <a href="https://msc.fema.gov/portal">current FEMA flood hazard maps</a> for accuracy.</p>
<p>This research provides national context for a detailed study that we are carrying out examining resilience and sustainability in the Mississippi River Delta. Our goal is to understand how human actions combined with natural environmental conditions may have <a href="https://link.springer.com/article/10.1007/s11625-016-0374-4">caused land to sink in the Mississippi Delta</a>. Our research on development in flood zones reminds us that flooding problems in low-lying coastal regions are not unique and also affect areas well away from the shore.</p><img src="https://counter.theconversation.com/content/81012/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Research for this article was partially supported by two grants from the National Science Foundation.</span></em></p>As Hurricane Harvey shows, flooding can happen wherever large storms stall and dumps lots of rain. A new study finds that development is increasing in flood zones inland, where people may not think they are at risk.Nina Lam, Distinguished Professor of Louisiana Environmental Studies, Louisiana State University Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/666642016-10-07T18:00:24Z2016-10-07T18:00:24ZWhen catastrophe strikes, who foots the bill?<p>Hurricane Matthew <a href="http://www.chicagotribune.com/news/nationworld/ct-hurricane-matthew-florida-20161007-story.html">has slammed into the Florida coast</a> after hammering Haiti. Close to 2 million people were asked to evacuate to escape its winds and rain. </p>
<p>While any loss of life will be the biggest concern, the hurricane is expected to cause extensive damage to buildings and infrastructure, leaving Floridians saddled with heavy losses – some insured and some not. </p>
<p>For a category 4 storm in this area – as it was deemed at one point – the <a href="http://www.bloombergquint.com/markets/2016/10/05/hurricane-matthew-is-a-15-billion-threat-headed-to-florida">economic disruption</a> is expected to cost anywhere from $5 billion to $15 billion, according to Bloomberg. The storm was later downgraded to category 3.</p>
<p>Real estate analytics firm CoreLogic <a href="http://www.corelogic.com/about-us/news/media-advisory-hurricane-matthew.aspx">estimates</a> that more than 954,000 homes in Florida are at risk of surge damage from a Category 4 storm, with another million at risk in South Carolina, North Carolina and Georgia. </p>
<p>So who’s going to pay for it? </p>
<h2>First lines of defense</h2>
<p>One consequence of climate change is that <a href="https://cdn.americanprogress.org/wp-content/uploads/2016/09/21081429/CostsOfClimate.pdf">extreme weather events</a> are occurring more often with the potential to cause catastrophic damage more frequently. According to the <a href="http://www3.weforum.org/docs/Media/TheGlobalRisksReport2016.pdf">2016 Global Risks Report of the World Economic Forum</a>, extreme weather events rank second as the most likely threat to global stability going forward. And my research on the safety and soundness of financial institutions suggests this trend may also threaten the stability of the insurance industry. </p>
<p>The first line of defense to deal with the costs are the insurance companies operating in Florida, which will be busy in coming weeks and months assessing and paying the insurance policy claims of the insured home and business owners. </p>
<p>But most of Florida’s property insurers <a href="http://www.businesswire.com/news/home/20160526006307/en/Fitch-Florida-Specialist-Insurers-Largely-Untested-Hurricanes">are relatively new</a> because the market went through a fundamental restructuring after Hurricane Wilma in 2005, transitioning from large national insurers to smaller ones focused almost exclusively on the state. Wilma caused $12.3 billion in insured losses (in 2015 dollars), <a href="http://www.tampabay.com/news/business/banking/hurricane-matthew-has-the-florida-insurance-industry-bracing-for-its/2296864">ranking it fifth</a> among the most costly U.S. hurricanes. </p>
<p>This has made the next line of defense, reinsurers, much more important. </p>
<p>Insurance companies buy backup policies with reinsurers to reduce their exposure to insurance claims that require potentially large payouts in extreme weather events. This allows firms to reduce their liability on individual claims and achieve a reduced overall risk exposure from greater diversification. </p>
<p>The costs of all these policies are rising, though, as the historical and mathematical models used to price the policies factor in the more recent and more severe storms. </p>
<p>If weather-related events in the future do turn out to be more costly for insurers than in the past, historical data and traditional policy pricing models may not support equity valuations in this industry sufficiently to keep the firms financially stable. In other words, the firms may not have enough financial firepower to cover future calamities. </p>
<p>So, while insurers, reinsurers and their regulators try to develop better models and tools to manage climate and other catastrophic risks, global financial markets have provided some relief. </p>
<h2>Cat bonds to the rescue</h2>
<p>The issuance of catastrophe (aka “cat”) bonds has become an important source of funding for the insurance industry and an effective tool for shifting some of the largest risks to capital market investors. </p>
<p>Essentially, cat bonds are like most debt securities in that the issuer (in this case an insurer or reinsurer) gets access to financing (held in escrow) from investors in exchange for regular coupon payments and the eventual return of principal. The difference with this type of debt is that if a loss greater than a pre-specified amount occurs as a result of a hurricane or earthquake, the issuer is allowed to delay or skip interest and/or principal payments, while the bondholders incur losses that can be substantial. </p>
<p>Yet, in a near-zero interest rate environment, investors have largely benefited from the higher yields associated with catastrophe bonds. And <a href="http://www.naic.org/cipr_topics/topic_insurance_linked_securities.htm">few cat bonds</a> have suffered losses as a result of hurricane or earthquake, making them (so far) very rewarding for their holders. </p>
<p>And those attractive returns have increased the demand for these bonds and boosted issuance of the debt. Currently, there are about <a href="http://www.wsj.com/articles/hurricane-matthew-to-test-catastrophe-bond-market-1475791599">$12 billion worth of catastrophe bonds</a> with at least some exposure to Florida storms. That’s a little over half of all $22 billion cat bonds outstanding. (Only $5.55 billion of the debt was outstanding in 2005.)</p>
<p>But these bonds <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2140653">are not entirely immune</a> to financial crises or natural catastrophes. And some argue that the good times could end as the Florida market <a href="http://www.tampabay.com/blogs/the-buzz-florida-politics/as-hurricane-matthew-nears-a-reminder-that-insurance-market-is-untested/2296854">is heavily reliant</a> on reinsurance and also cat bonds, which means pension plans and other holders of the debt <a href="http://www.wsj.com/articles/hurricane-matthew-to-test-catastrophe-bond-market-1475791599">could face substantial losses</a> in case of extreme damage. </p>
<h2>Flooding losses</h2>
<p>These types of insurance <a href="https://www.allianz.com/en/press/news/financials/stock_bonds/news_2007-04-10.html/">typically</a> only cover wind-related damage from hurricanes. Yet such storms are also associated with extensive flooding. That’s covered by a different type of insurance altogether. </p>
<p>The National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA) works with several insurance companies to provide flood insurance to individuals and businesses in communities that have joined NFIP and adhere to sound floodplain management standards. </p>
<p>This is an example of a public-private partnership <a href="http://ascelibrary.org/doi/abs/10.1061/(ASCE)NH.1527-6996.0000201">that could be extended</a> to help protect against other extreme threats. The recent flood in Louisiana, for example, <a href="http://www.claimsjournal.com/news/southcentral/2016/09/09/273375.htm">is estimated</a> to have caused economic losses in the range of $10 billion to $15 billion. </p>
<p>FEMA has limited resources available to help the uninsured who often face daunting financial losses. According to the <a href="https://www.americanprogress.org/issues/green/report/2016/09/22/144386/the-costs-of-climate-inaction/">Center for American Progress</a>, FEMA provided about $67 billion in financial assistance to communities and individuals, or about $200 per U.S. resident, from 2005 to 2015. </p>
<h2>No insurance, no problem?</h2>
<p>But who pays when there’s no insurance? In the recent Louisiana flooding, for example, a <a href="http://www.claimsjournal.com/news/southcentral/2016/09/09/273375.htm">model suggested</a> 80 percent of damaged homes didn’t have flood insurance. </p>
<p>In Florida’s case, Citizens Property Insurance covers homeowners who cannot find insurance on the open market. This state-run company has reportedly spent a decade <a href="http://www.tampabay.com/news/business/banking/hurricane-matthew-has-the-florida-insurance-industry-bracing-for-its/2296864">increasing its reserves</a> and reducing the number of policies it covers. </p>
<p>Its $7.5 billion surplus, access to the Florida Hurricane Catastrophe Fund and reinsurance backup should help it handle a 1-in-100 year storm without having to levy new assessments on property owners, according to Citizens. </p>
<h2>More extremes lie ahead</h2>
<p>Extreme weather is expensive for insurance companies and their reinsurers, communities, taxpayers and also, potentially, capital market investors. </p>
<p>And it’s only getting more expensive as climate change increases the frequency of storms and their severity. </p>
<p>While more can be done to improve risk pricing and risk management, climate change mitigation is critical for our ability to continue to survive and recover from the catastrophes that lie ahead.</p><img src="https://counter.theconversation.com/content/66664/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carolin Schellhorn does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Even though Hurricane Matthew has been downgraded to category 3, it’s expected to cause substantial damage to Florida and other states in the region. The question is, who pays.Carolin Schellhorn, Assistant Professor of Finance, St. Joseph's UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422352015-06-02T10:12:41Z2015-06-02T10:12:41ZTexas floods highlight need to reform key insurance program<p><em>This article is part of The Conversation’s series this month on hurricanes. You can read the rest of the series <a href="https://theconversation.com/us/topics/hurricanes-2015">here</a>.</em></p>
<p>Torrential storms have been coursing through much of Texas in recent days, prompting <a href="http://www.cnn.com/2015/05/31/us/severe-weather/index.html">massive flash flooding</a> that has swept away entire homes and left wakes of devastation. </p>
<p>Floodwaters continue to rise, so it will be days if not weeks before we can calculate the final costs, both in terms of life and property. But regardless, many will be turning to the federal government’s National Flood Insurance Program (NFIP) for help – it’s the only way to insure a property against damage from flooding. Unfortunately, it’s broke – and its very nature encourages development that makes each flood more damaging than the last. </p>
<p>While that doesn’t mean residents of Texas and elsewhere suffering from flood-related damages won’t get assistance, it does show that a reckoning is coming – either for policyholders or taxpayers. Without reforms to the NFIP that raise more money from premiums, its financial deficit will continue to widen and pile of debt will grow unchecked, eventually requiring a taxpayer-funded bailout to repair the damage. </p>
<p>Policyholders are likely unaware of the underlying finances, as the program has generally borrowed to pay off previous claims rather than raising rates.</p>
<p>Furthermore, the program encourages development of areas prone to flooding – while discouraging investment in modest protections – thereby leading to both costlier damages and environmental degradation. The point being that left largely alone, the floodplain provides essential protection against inland flooding and natural habitats for diverse wildlife. </p>
<p>Reforming the program to force property owners who choose to live in areas ripe for flooding to bear the real costs of ownership would help shore up the program and limit development on the floodplain, ensuring towns and cities throughout the US suffer less when waters rise. </p>
<h2>The government flood insurance market</h2>
<p>The NFIP, a government program that provides flood insurance to property owners across the United States, is more than <a href="http://www.gao.gov/highrisk/national_flood_insurance/why_did_study">US$20 billion in debt</a> and unlikely to ever pay off its creditors. </p>
<p>Under the program, the government requires anyone with a federally backed mortgage to purchase flood insurance if they live on a 100-year floodplain – about 16 million people, according to a <a href="http://stateofthecoast.noaa.gov/pop100yr/welcome.html">2010 estimate</a> from the National Oceanic and Atmospheric Administration. </p>
<p>Congress created the NFIP in the late 1960s after several large floods exposed homeowners and businesses without flood insurance to billions of dollars in losses. Insurance companies had not offered flood insurance through the private market since the 1920s. During the intervening years, virtually no insurance for flooding was available to homeowners, and typical home insurance policies did not cover flood damage. As a result, following a flood, homeowners were left to pay for damages themselves. </p>
<p>While the program has helped many flood victims, it also encourages development in coastal areas because the premiums are below what the risk-adjusted market rate would be and the US government essentially writes blank checks to cover losses. This ends up increasing the damages and loss of life from hurricanes and severe coastal storms. The program also encourages development in other flood basins, also increasing damage due to flooding.</p>
<p>Some areas have flood maps that dramatically understate the flood risk. The director of the Federal Emergency Management Agency (FEMA), which creates those maps, has said that only half are accurate and <a href="http://www.pianet.org/issues-of-focus/flood/2014/femasaysnfipfinancesunstable073114">has described</a> the NFIP’s finances as “unsustainable.” </p>
<p>And the latest report from the Government Accountability Office <a href="http://www.gao.gov/highrisk/national_flood_insurance/why_did_study">called</a> the program “by design, not actuarially sound.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/83030/original/image-20150527-25095-10ybina.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The National Flood Insurance Program is billions in debt and encourages poor floodplain management.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/usgeologicalsurvey/2593495681/">U.S. Geological Survey/Flickr</a></span>
</figcaption>
</figure>
<h2>Not financially sound</h2>
<p>The NFIP is not a financially sound way to insure against floods and natural disasters because it collects in premiums far less than it pays out in claims. </p>
<p>The program extends subsidized rates to policyholders who meet certain conditions, including those who own property developed before 1974. The Federal Emergency Management Agency, the agency that manages the NFIP, also provides discounts to areas protected by levees or other physical barriers. </p>
<p>A <a href="http://www.gao.gov/new.items/d11670t.pdf">2011 GAO report</a> found more than one in five policyholders receive a subsidized policy, usually with a discount of 50% to 60%. Other policyholders partially pay for these subsidies through increased premiums on their own policies. </p>
<p>As a result, the NFIP is running a cumulative loss. To cover the losses, the NFIP borrows from the US Treasury, which in turn taps investors around the world to lend it more money, contributing to the national debt. At the close of 2014, the NFIP was $23 billion in the red.</p>
<p>Most of this is <a href="http://www.fema.gov/media-library-data/1408038596021-3354eb12e21447bc19f59d80a75a82fa/7-23-14%20-%20HFIAA%20Hearing_508.pdf">due to two large events</a>: Hurricane Katrina in 2005, which resulted in $17.5 billion in claims, and Superstorm Sandy in 2012, which cost $6.25 billion. </p>
<p>The NFIP has historically carried a much smaller debt. Prior to 2005, its debt <a href="http://www.washingtonpost.com/wp-srv/business/documents/health-science-NFIP-123110.pdf">peaked in 1997</a> at $917 million, an amount that was paid off by 2002. </p>
<p>While larger than other flood events, these storms represent the known peak flood risk. Accordingly, these peaks should be accounted for in assessing the flood risk and associated premiums. As global climate change affects weather patterns, hurricanes and overland heavy rainfall storms are increasing in intensity, and the associated claims paid by the NFIP are rising.</p>
<h2>Overdevelopment, environmental degradation</h2>
<p>The NFIP also ends up <a href="http://www.fema.gov/media-library-data/20130726-1602-20490-5762/nfip_eval_dei_summary_report.pdf">encouraging overdevelopment</a> on the floodplain. </p>
<p>The program subsidizes development there by transferring the costs away from current developers and property owners and to either future owners or taxpayers. Repeatedly flooded properties also receive an indirect subsidy through the frequent rebuilding costs, which are absorbed by the NFIP and not the property owner.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=195&fit=crop&dpr=1 600w, https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=195&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=195&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=244&fit=crop&dpr=1 754w, https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=244&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/83174/original/image-20150527-4831-fe3gs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=244&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Coastal development is at higher risk of flood and damages the natural protections against flood.</span>
<span class="attribution"><span class="source">Tyler Merbler/Flickr</span></span>
</figcaption>
</figure>
<p>Such development reduces overall flood protection. The floodplain, through beaches and barrier islands, helps absorb the impact of rising waters. Building immediately adjacent to water reduces the strength of these natural barriers. </p>
<p>Further, development removes <a href="http://www.dnrec.delaware.gov/swc/shoreline/pages/duneprotection.aspx">plant life and natural grasses that prevent erosion</a>. As beachfront erodes, its protective quality declines. Non-coastal areas are affected, too, when marshes and bogs are filled to provide arable or buildable land.</p>
<p>Returning these areas to their natural state and leaving them there would reduce overall flood damage. When coastal barriers and inland wetlands are able to absorb increase groundwater flow, nearby areas are naturally protected. Natural flood defenses will be increasingly important as the climate change causes sea levels to rise and increases the severity of storms.</p>
<h2>Short-lived effort at reform</h2>
<p>Even before Sandy, policymakers recognized the need to fix the NFIP’s finances. In 2012, Congress passed the <a href="https://www.fema.gov/media-library/assets/documents/31946">Biggert-Waters Flood Insurance Reform Act</a>, which required the NFIP to modernize the program by boosting premiums to levels that match the risks. Thus, the NFIP would move toward financial stability.</p>
<p>Biggert-Waters also mandated updates to the flood insurance rate maps that determine the cost of flood insurance for property owners, to more fairly and accurately allocate premiums. Rate changes <a href="http://www.gao.gov/assets/660/655734.pdf">were to be phased in</a>, with more than half of subsidized policies continuing to receive some level of discount.</p>
<p>But owners whose properties went from lower- to higher-risk status were not too pleased when their premiums increased and reeled when notified of the higher rates they’d have to pay. And many were simply unable to afford them. </p>
<p>As a result, these policyholders successfully pressured Congress in 2014 to <a href="http://www.insurancejournal.com/news/national/2014/03/26/324439.htm">roll them back</a>. The Homeowner Flood Insurance Affordability Act restored subsidies to grandfathered properties and capped the amount insurance premiums could increase. The Act also required FEMA to study flood insurance affordability. </p>
<h2>Congressional action necessary</h2>
<p>The risk transfer through reduced rates and the overdevelopment of the floodplain deliver a one-two punch to taxpayers and the environment unless reforms are made that require developers and owners to bear the true cost of building in those areas. </p>
<p>Biggert-Waters addressed these issues by requiring flood insurance policyholders to pay more of their share of the flood risk, but the law’s dilution means taxpayers are still left holding the bill after subsidizing property owners to remove vital flood protection along the coasts. </p>
<p>Congress still has the opportunity to stabilize the NFIP. Lawmakers should act soon to again allow the program to raise premiums to cover the true costs of insurance and gradually reduce the debt. </p>
<p>Further, the NFIP should cut program subsidies. By exposing property owners to the full cost of their building decisions, property owners would make better development decisions on the floodplain. That would leave us all a little better insured, against both inland flooding and getting socked with another bailout.</p><img src="https://counter.theconversation.com/content/42235/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James P Howard, II works for Eagle Ray, Inc., providing strategic transformation services to U.S. Citizenship and Immigration Services, a part of the United States Department of Homeland Security.</span></em></p>The National Flood Insurance Program – the only source for flood-prone property protection – is drowning in debt.James P. Howard II, Adjunct Faculty, Public Administration, University of BaltimoreLicensed as Creative Commons – attribution, no derivatives.