For its part, NAMIC has proposed a series of reforms to optimize the program and return the NFIP to financial stability and sustainability. Those solutions include:

Actuarially sound rates. The separation of rates from the actual cost of living in a flood-prone area represents the biggest problem with the program today. To avoid encouraging citizens to move to risk-prone or environmentally fragile areas, the actual price charged for flood coverage must reflect the actual risk. The rates charged for flood coverage should be actuarially sound to get the program on solid footing.
Updated flood zone maps. Additional federal funds should be allocated to the national flood hazard mapping program. Updating and improving flood maps should be a priority of FEMA, as well as identifying communities that will benefit most from updated flood maps. Speedy adoption of updated flood maps should be encouraged so that people in flood-prone areas can get the protection they need.
Long-term reauthorization. Repeated short-term reauthorization creates uncertainty and can lead to lapses in the program, as we saw in 2010. During these lapses, companies were not permitted to write new policies, issue increased coverage on existing policies, or issue renewal policies. The NFIP should be reauthorized for an extended time period in order to give more stability to the program and consumers.
Outside subsidies. As noted above, the move to actuarially sound rates is likely to be painful due to the higher premiums that will be charged. For those citizens who require it, flood vouchers might be offered—independent of the NFIP—to help mitigate the costs. Any additional subsidies that the government determines are necessary must be independent and transparent.
Improve take-up rates. Currently only 20 percent to 30 percent of property owners exposed to flood hazards actually purchase insurance. The program needs to improve these numbers dramatically in order to stay on a stable fiscal footing. There are several possible ways to improve these take-up rates:

Data monitoring—FEMA and the NFIP's policy and claims monitoring systems are deficient, as highlighted by a recent Government Accountability Office study on at-risk federal programs. New and clearer procedures for monitoring contracts will improve take-up rates and enforcement by mortgage lenders.
Stiffer penalties—Fines should be imposed on financial institutions that fail to require flood insurance coverage for mortgages on properties in flood-prone areas or allow those policies to lapse.
Improved education—The NFIP should be given additional resources and a renewed mandate to improve and expand its public education programs to ensure that more people are aware of the program and the benefits of having flood insurance coverage to protect their properties.
Disaster relief waiver—Require homeowners in flood-prone areas to sign a waiver stipulating that they forfeit their right to disaster relief in the event they choose not to purchase flood insurance.

Congress this year began work on the issue with a March 11 House Financial Services subcommittee hearing. "With fewer distractions, and without a need to rush through an extension, we're looking to make significant progress on reforming the NFIP this year," said Sandra Parrillo, president and CEO of Rhode Island-based Providence Mutual and chairman of the board of directors for NAMIC. "The reforms NAMIC has proposed have strong support on both sides of the aisle and can help move the NFIP toward a more solid financial footing."

Special Reports /

NFIP: The Next Move

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