July 20--As the floodwaters that inundated northern Illinois last week start to recede, the nation's main flood insurance program is facing potential changes that could hit residents with increased premiums.
The National Flood Insurance Program, which the Federal Emergency Management Agency administers, is set to expire Sept. 30. About half a dozen bills to address the issue have been introduced in Congress, at least one of which looks to increase premiums to help pay for the debt-laden program.
If the insurance premiums become too expensive, people could be priced out of their homes, said Dennis Sandquist, director of planning and development for McHenry County, one of the areas drying out from last week's flooding.
"We understand that the NFIP can't continue to operate at a deficit, but we also realize flood insurance needs to be affordable to homeowners," Sandquist said. "For better or worse, we have these homes in the flood plains, and we need to manage construction of new ones. They need to continue to have flood insurance."
McHenry County has more than 1,825 acres in the flood plain, which FEMA defines as an area that would be underwater during a flood that only has a 1 percent chance of occurring each year. There are 3,150 residential properties in the county where the flood plain covers more than 50 percent of the parcel.
Heavy rains last week triggered record flooding in areas along the Fox and Des Plaines rivers north of Chicago. The ground became saturated and basements flooded. Once the rains subsided, water flowing down from Wisconsin continued to inundate communities.
Gov. Bruce Rauner on Friday issued a disaster declaration for Lake, Kane and McHenry counties and later added Cook County.
The National Flood Insurance Program will be critical as the floodwaters recede and McHenry County starts assessing the damage, Sandquist said.
The program provides $1.25 trillion in coverage for about 5 million policyholders nationwide. While the lion's share of those policies are in coastal areas, more than 42,000 were in Illinois as of April. Nearly half those were in the four counties covered by the disaster declaration.
Private companies sell the National Flood Insurance Program's policies, but FEMA backs them. Private flood insurance is rare, as it doesn't spread the risk out for companies.
The federal program, however, carries $24.6 billion in debt to the Treasury Department and pays nearly $400 million per year in interest. Payouts from Hurricane Katrina, Superstorm Sandy and a few other recent and devastating flood events saddled the program with debt. The challenge facing Congress is how to get that debt down without placing too heavy a burden on policyholders.
Some argue that updating FEMA's flood plain maps would help ease some of that debt.
Flood insurance rates are calculated in part based on flood zones. FEMA maintains and updates maps of those zones that include aerial photos and information on river flows, storm tides, rainfall, topography and more.
While FEMA does update the maps -- parts of Lake and McHenry counties were revised in the past several years, for example -- it's largely up to participating communities and policyholders to provide updated data.
"We don't have a big eye in the sky watching what's going on," said David Schein, regional flood insurance specialist for FEMA. "The communities in the program are responsible for telling us what is going on ... so we can keep the maps current."
All too often that doesn't happen, Schein said.
Some hope legislation can streamline that process.
"We've got some people who should probably be paying more (for) insurance (and) some people who shouldn't be paying it at all," said Karen Robertson, a broker associate and real estate agent for Shorewood-based Spring Realty. "We're basically guessing, Do we or don't we need flood insurance? We're wasting time and literally thousands of dollars."
Policyholders can dispute the maps if, for example, they've raised their home and reduced its flood risk. Some argue that process is expensive for property owners.
Communities must abide by federal standards in order for their residents to be eligible for flood insurance through the program. That can involve passing ordinances for construction in flood zones.
Some maps in northern Illinois date back to the late 1970s or early 1980s, Schein said.
As the maps are updated, it's common for the flood plains to get bigger. The National Flood Insurance Program currently allows policyholders who bought homes before the maps changed to keep paying the lower, or grandfathered, rates.
"Grandfathering is a huge discount on the actuarial premium," Schein said. "We're not charging them for the actual risk of flooding; we're charging them for the risk it was before we mapped the flood zone."
A bill introduced by Rep. Sean Duffy, a Wisconsin Republican, calls for no new grandfathered rates after 2021 and would raise premiums on some existing grandfathered policies annually until they reach full-risk rates.
The bill also aims to develop more accurate maps through use of technology and provide some assistance to low-income policyholders.
Since the maps are relatively new in McHenry and Lake counties, that means "there are probably a substantial number of folks that are paying grandfathered rates," Schein said.
Lake County is dependent on those grandfathered rates, said Mike Warner, director of the county's stormwater management commission.
"It'll be like your insurance company for your car telling you, 'OK, well, you're paying $1,000 a year for car insurance and it's going to go up another $2,000 a year,'" he said. "How do you handle that personally on your limited budget?"
There were about 2,825 policies in force in Lake County as of April, more than double the number in McHenry County.
In the village of Gurnee in Lake County, which was hit hard by the flood, there were 87 policies in force.
Gurnee has had some storied floods, village spokesman Jack Linehan said. One in 1986, when floodwaters crested at 11.9 feet, held the record until last week.
"But anyone who's been through both can tell you the '86 (flood) was worse," Linehan said.
Gurnee has been taking steps to prevent flood damage with funding assistance from FEMA. It has bought out 26 properties in flood-prone areas and relocated a grade school out of a flood zone. "That helped tremendously" when the floodwaters came this time, Linehan said.
Properties don't have to be in the flood plain to get flood insurance. But flood insurance is required to get a mortgage from a federally backed lender on a home in a flood plain.
That is why it is critical that the program does not lapse, like it did back in 2010, McHenry County's Sandquist said. While existing policies would remain intact, home purchases in flood-prone areas could stall.
"Congress needs to reauthorize this program or else it will be total chaos," Sandquist said.
amarotti@chicagotribune.com
___
(c)2017 the Chicago Tribune
Visit the Chicago Tribune at www.chicagotribune.com
Distributed by Tribune Content Agency, LLC.
|
