FEMA flood data is missing for 750,000 homes, complicating insurance premiums

Inaccurate elevation data on thousands of homes – particularly those most at risk – stands to distort premiums and government subsidies.

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Insurance agents working with the owners of more than 750,000 high-risk homes may have trouble finding accurately priced flood policies thanks to missing, outdated and inaccurate data from the National Flood Insurance Program.

According to a recently released technical report from the National Research Council, FEMA has accurate elevation data on just 240,000 properties that enjoy subsidized insurance rates – just one-quarter of the homes under its purview. Even more worrying is the fact that the most at-risk homes – low-lying older buildings near high-frequency flood plains – are most often those whose information is missing.

“There may be as many as a million structures that fall within this category, which means that they’re especially low-lying at at greater risk than structures, for example, that comply with fthe flood insurance program’s sort of implicit land-use management criteria,” said David Ford, chairman of the NRC committee that authored the report.

Because elevation is a key part of determining premium cost, rates for these homes could be wildly inaccurate. What’s more, FEMA’s attempts to scale back flood insurance subsidies for homeowners could be disrupted.

“It’s a big challenge,” Ford said. “They’re working hard to be fair and unbiased in how they do that. For many [engineers], that would be an almost overwhelming task.”

The report authors suggest that FEMA’s largely outdated technology is to blame – something insurance agents, flood insurance carriers and other invested insurance professionals have been well aware of for some time.

“With most insurance lines, there is so much data out there that carriers have a very high confidence level of what the probability of loss is going to be. With flood, FEMA maps aren’t right all the time,” said Dan Freudenthal, president of Flood Zone Correction, Inc. – a risk management specialist that employs civil and coastal engineers to independently evaluate property and its flood risk.

Freudenthal says agents who take the initiative to procure a more accurate look at a property’s risk – or even shop in the private market – can end up satisfying customers, reducing E&O risk and even making a name for themselves in a tough market.

“It can go from being a weakness or a nuisance to a source of strength and opportunity,” he said.

The NRC report was requested by FEMA officials and makes no formal recommendations for the program, which is roughly $24 billion in debt following major disasters like Hurricane Katrina and Superstorm Sandy.
 
 

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