Bill Targets Flood Insurance Claimants

WASHINGTON – Legislation heading for the president's signature would begin to crack down on property owners who make repeated flood damage claims (search) that sometimes far outstrip the value of the property.

The new procedure, targeting a fraction of the 4.5 million policyholders in the National Flood Insurance Program (search), would force repeat claimants to accept flood mitigation efforts, move, or face significantly higher premiums.

The House on Monday voted by voice to extend the life of the program, founded in 1968 to help people in flood-vulnerable areas get reasonably priced insurance, until September 2008. The Senate passed the bill last week.

The flood insurance program partners with some 20,000 communities around the country, offering cheaper insurance rates in exchange for efforts to reduce future flood damage. It is a component of the Federal Emergency Management Agency (search).

FEMA estimates that these partnerships cut flood damage by nearly $1 billion a year. But the insurance program, self-supporting overall, also pays out about $200 million annually, nearly 30 percent of total claims, to property owners who hold only 1 percent of policies.

These repetitive loss properties are defined as those with two or more claims of more than $1,000 over the deductible within a 10-year period.

The new loss mitigation pilot program applies to an even smaller group, some 6,200 properties nationwide classified by FEMA as subject to repetitive losses.

These include properties for which four or more separate claims have been made, with the amount of each claim exceeding $5,000, or the cumulative amount exceeding $20,000.

Rep. Doug Bereuter, R-Neb., leading sponsor of the bill, cited one example where a home valued at $114,000 had received $806,000 in flood insurance claims over 18 years.

"Congress is finally acting to stop the very expensive treading through the water of repetitive loss after repetitive loss," said Bereuter, joined in sponsoring the bill by Rep. Earl Blumenauer, D-Ore., and in the Senate by Sen. Jim Bunning, R-Ky.

Under the new program, funded at $40 million, landowners would be offered assistance in elevation, relocation, floodproofing or demolition and rebuilding. Owners who refuse the offer would see their premiums increase by 50 percent the first time, and an additional 50 percent for every future claim exceeding $1,500 until reaching the actuarial rate for the property.

Bereuter's office said the national average for premiums under NFIP was $396 a year, about 38 percent of the true risk rate.