Videos...
There it is.
A few years ago, the apartment I lived in in Vancouver
flooded during a rainstorm.
"That's dry carpet, right there."
It wasn't that big a deal, really, but
I did see how much damage even half a foot of water
can do to a building.
The flooding we all saw in the US this summer
was so much worse.
TODAY anchor: "A sobering look at Ida's devastation."
NBC anchor: "We're looking at 62M people
from North Carolina to Maine
bracing for flooding now."
CBS anchor: "We've seen water coming in through the subway,
FDR is shut down."
Floods are the most common and most destructive
natural disaster in the United States.
More than 1 in 10 Americans live at high risk of flooding today,
and many of them don't even know it.
Across the country, it's low-income and minority communities
that are most severely affected by floods.
And for all those people,
when the waters recede, their ability to recover
hinges on one thing above all else:
flood insurance.
I had no idea about this,
but in the United States,
flooding isn't covered by standard homeowner's insurance,
and most people don't have flood insurance.
So this got me wondering,
Why?
Why do so few people have flood insurance
in such a flood-prone country?
To help me navigate this story,
I spoke to someone who really understands it,
and someone who wrote a whole book about it.
[Off camera] Can you just introduce yourself, your name and what you do?
I'm Rebecca Elliott,
I'm an assistant professor of sociology
at the London School of Economics.
Rebecca helped me understand that, in the US, flood insurance...
well, it's a bit weird.
It's not like other insurance.
A lot of people don't realise that
flood insurance is actually a publicly run
federal program in the United States.
But indeed,
flood insurance is provided through the
National Flood Insurance Program
for virtually all homes and small businesses in the US.
It was established by Congress in 1968
because at that time,
private insurers basically said
"We're not interested in underwriting flood risk."
Flood risks are highly correlated in specific areas,
if there's one devastating flood
then you have a lot of claims at the exact same time;
it's very hard to do business under those circumstances.
And private insurers also believed that
they didn't actually have sophisticated enough
methods for assessing the risk
or for pricing it.
And so there just was no private market,
which of course meant that
when floods happened you had people who
were depending on whatever savings they had,
on organisations like the Red Cross,
or on disaster relief.
And that became the status quo for decades.
That is, until a breaking point came,
in 1965:
a category 4 hurricane named Betsy.
Narrator: Betsy is here.
Gusts now topping 100mph.
Rebecca: And in the aftermath of that disaster,
President Lyndon Johnson said
flooding is clearly a huge problem in this country,
it's already the most costly natural disaster we face as a nation,
Flood insurance needs to be a bigger part of that solution.
So Congress created the National Flood Insurance Program
with two main goals.
One was to build a sustainable financial safety net
to compensate flood victims
without having to rely on federal aid.
The other goal was more nuanced,
and a lot more challenging.
Rebecca: Whereas previously,
the approach to dealing with floods had really been
structural flood protection, let's build more levees,
more things that kind of keep
the water away from people.
Part of the idea of flood insurance was, well,
let's use this as a tool to kind of
engineer behaviour
to keep people away from the water.
So they came up with a plan:
They'd map out flood risk across the country
and then use those maps to figure out
how much to charge for premiums.
So they got to work on the maps.
They carved the country into flood zones.
Any area with more than a 1% annual chance of flooding
they considered "high risk".
They also set some rules.
They said:
'If you have a federally backed mortgage,
and you're at high flood risk,
you have to buy flood insurance.
And if you want to reduce your premiums,
you have to reduce your risk.'
But here's where the problems start.
These flood maps are riddled with issues.
They're expensive to maintain,
a majority of them are out of date.
They also often oversimplify and underestimate risk,
which can mislead homeowners.
In many cases,
flooding happens in low-risk flood zones,
or outside of them altogether.
Now, to be fair to FEMA and the NFIP,
they're aware of these issues,
but they have limited resources,
and their hands are tied by Congress.
It's not just the flood maps, either,
that keep people in the dark.
Homebuyers may not be aware
of their new property's flood history
Because,
and I found this to be really surprising,
but in many states,
there's no legal obligation to disclose flood history
when someone buys a house.
That's what happened to Gloria.
Gloria: Did I know what I was getting into when I bought this house,
and did I know about the flooding?
No!
Because they don't tell you.
I know 3 times of it being flooded.
In Sally 2020 I lost everything.
[Gloria, off camera]: Here we are folks. Sally.
The water inside my house was 3+ feet.
And that's not just water.
It was also sewage.
[Asher, off camera]: Gloria's flood insurance replaced her walls and floors,
but she hadn't purchased the NFIP's contents coverage,
and her home insurance didn't cover that either.
Gloria: Well financially, I'll tell you,
it bankrupted me.
I lost
all my camera equipment, all my microphones,
all my lights,
my antiques,
family heirlooms,
photo albums.
I also lost my car.
So that literally put me at a zero.
And,
that was my retirement funds.
The more and more I think about it,
I still have my house.
I'm a lot better than so many.
So many.
I was curious how much flood insurance
usually costs in the States,
And it turns out,
it ranges from a few hundred dollars a year, to
thousands or tens of thousands
if you live somewhere really risky.
But how the NFIP calculates and lands on those premiums
is probably the most controversial aspect of this story.
On the one hand,
insurance rates are meant to reflect underlying risk.
If you smoke,
you pay more for life insurance, right?
If you bang up your car, your rates go up.
So if your property floods, you're riskier,
and you pay more for insurance.
In many places,
pricing this way would mean really expensive premiums,
unaffordable for many people.
And when the NFIP started, it seemed unfair
to suddenly drop these hefty premiums
on people living in the floodplain.
So they introduced subsidies.
They discounted premiums to make them more affordable
with a view to phase them out and
go full price eventually.
But that didn't happen.
Even today,
lots of policyholders are paying discounted rates
that don't reflect their actual flood risk.
There have been lots of attempts
to phase those subsidies out,
but they've always been challenged or rolled back
over legitimate concerns about affordability.
So, why phase them out at all?
Why not keep the subsidies?
Those discounts sound great for the homeowner,
but discounted premiums cause a couple of big problems.
First, underpriced premiums are the main reason that,
since Katrina,
the NFIP has been billions of dollars in debt.
Subsidies also skew the risk signal.
Lower rates mean more people are more likely
to move to the floodplain.
This is known as moral hazard.
What we know if we look around the country is that
building in floodplains has continued apace.
So now, what we have,
is we have more people, more property at risk
than we've ever had before.
Even when a building floods repeatedly,
its owners may decide to remain in place
collecting insurance payouts for every flood.
These are known as repetitive loss properties
and though they make up just 1% of NFIP policies,
they account for 30% of payouts,
and have cost the program over $20Bn since the NFIP's inception.
Which begs the question,
why stay?
If your home floods multiple times,
why not move away?
Gloria [off camera]: Why don't I move?
Well that's easy to say,
but when you don't have any money
and there's a mortgage on the house,
and nobody's going to give you a loan now that you're retired,
where am I going to go?
So I just keep trying to mitigate it.
I've brought in rocks,
I've brought in flood barriers.
It's quite trying.
Every time it rains
I'm watching.
To make sure I don't need to
hightail it out of here.
But I have no other choice.
You know, so...
Me and so many others, we're just...
This is what we have, and we can't go any further.
Rebecca: Flood insurance and flood risk
can affect your property values.
And so I think this is the other big story that we're seeing
and this is I think the one that is
perhaps even more unsettling,
because people are saying:
"how am I going to sell this house
for any kind of return?"
That's a huge problem,
because
the entire sort of model of social provision in the United States
is built on this idea, really, that
the most secure path to
economic flourishing is
to buy a house. You know, that's the American dream.
So, many of the people at highest risk of flooding
are those least able to afford
retrofitting their homes,
paying high premiums,
or selling their home, possibly at a loss,
and moving away.
Communities of colour also face greater flood risk,
which is tied to the legacy of redlining:
discriminatory lending practices from the 1930s
that relegated people of colour into "undesirable" neighbourhoods—
often neighbourhoods that are prone to flooding.
This brings us to today.
And the NFIP is actually, like right now,
undergoing its first big update since it began.
It's called Risk Rating 2.0.
And this is a big deal
because it will begin to phase out subsidies for most people
squaring a property's premium
with its underlying flood risk.
And it will factor more variables in than before.
Most people will see their rates go up,
but almost a quarter will pay less for flood insurance.
And FEMA emphasises that without the change,
everybody would pay more,
and that Risk Rating 2.0 will be more fair.
Rebecca: What that
leaves aside, what that doesn't acknowledge,
is the fact that any individual's exposure to risk
high or low,
is the product of collective decisions
that predate them and transcend them.
There are all kinds of things that people
as individuals
can't actually exert a whole lot of meaningful control over.
and we're saying that nevertheless,
your risk is what it is,
and you need to bear that cost more fully.
One of the perhaps even bigger, more fundamental stakes
is this question of
of what we owe each other
in a world where
people are facing intensifying risks
and higher losses.
Because we're not just talking about the flood zones
of the US anymore.
We're talking about wildfires in the West,
we're talking about droughts in the Midwest.
We're talking about extremes of heat and cold
around the country.
I mean, everyone is facing these kinds of perils,
And so I think the fundamental question is
are we in this together,
or are we going it alone?