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Ongoing coverage of South Carolina's recovery from the flooding of 2015.What had been Lindsay Langdale's Columbia home October 3, 2015 was a flooded ruin the next day.This coverage is made possible by a grant from the Corporation for Public Broadcasting. In October of 2015, South Carolina received rainfall in unprecedented amounts over just a few days time. By the time the rain began to slacken, the National Weather Service reported that the event had dumped more than two feet of water on the state. The U.S. Geological Survey reported that the subsequent flooding was the worst in 75 years.

National Flood Insurance Program Affordability

Courtesy U.S. Coast Guard/Credit Petty Officer 1st Class Stephen Lehmann

The National Flood Insurance Program has a problem.

More than 5 million people, mainly in coastal states, have policies through it, but the federal program is in more than $23 billion in debt. Experts feel reforms are needed as the 2017 renewal approaches. One of those people is Howard Kunreuther, co-director of the University of Pennsylvania’s Wharton Risk Management and Decision Process Center. He was part of a study last year focused on Charleston, South Carolina.

“It has hurricane problems, it has flood problems, and it actually has earthquake problems, so it does face natural disasters and has suffered a number of them.”

One of the most recent of these was the flooding across South Carolina last fall. Economists at the University of South Carolina estimate the damage to be $12 billion statewide. In a 2015 paper, Kunreuther and colleagues suggest ways to make how to make flood insurance more affordable and encourage people to take steps to make their homes safer.

“First thing is transparency,” he said.

Kunreuther asserts in his study that if premiums in high risk flood zones were based on risk, in Charleston County they could increase more than 100 percent. And while those numbers may be daunting, he believes people need to know their actual risk.

An Attempt at Full Cost

According to the study, about 20 percent of insurance policies under the NFIP are subsidized to ensure policy holders can afford the premiums. The authors say that model was sustainable until 2005. After Hurricane Katrina the NFIP started to amass billions dollars of debt. Congress passed a law in 2012 that was intended to increase premium costs to match risk levels. But after concerns about affordability were raised another measure was codified that delayed rate hikes.

Incentivizing People to Mitigate Properties

Kunreuther isn’t suggesting that everyone starts paying the full-risk amount of their premiums. He proposes incentivizing people to lower their risk by taking steps to “flood proof” their homes. Elevating houses even a few feet can decrease risk-based premiums up to 80 percent. But recognizing that can be expensive, he suggests a voucher program.

“Similar to a food stamp, this would be an insurance mitigation voucher so that you could afford to do those things,” Kunreuther said. “We would tie that voucher to the idea that the individual household would mitigate. In the process, the house is safer, the premiums are lower, the government actually has to pay less in the way of a voucher, and the homeowner has less cost in general because they actually have a safer house.”

South Carolina already has multiple grant and tax incentive programs to make homes safer. One of which has awarded more than $20 million in grants since 2007 to help homeowners retrofit coastal properties. Kunreuther said these mitigation measures are becoming increasingly important as more people relocate to these high risk areas. Last year Mt. Pleasant near Charleston was among the top 10 fastest growing towns in the nation.

“More and more people moving into areas that are hazard prone, hurricane prone, flood prone. And so when you have increasing developments independent of climate change, you are going to get greater losses. That’s been happening throughout the country and certainly on the coasts,” he said.

The South Carolina flood mitigation program is reporting more people have bought insurance through the NFIP since last year. Even with the increase, the total is just more than 200,000 policies. But these numbers don’t represent the whole picture; they don’t include people who have flood insurance through private companies. Kunreuther said getting insurance is becoming increasingly more important as storms hit harder.

“We certainly know from climate scientists that hurricanes today, there is a general agreement on this point, are more intense,” he said. “They may not be more frequent but the ones that occur are more intense.”

The Federal Emergency Management Agency declared 27 flooding disasters last year and payouts totaled more than $800 million.