USA - 10 States Sue FEMA Over Costly New Insurance Pricing
The federal agency that helps people cope with major storms is facing its own tempest. Ten states are suing the Federal Emergency Management Agency, also known as FEMA, to try to halt its new pricing system for flood insurance.
For its National Flood Insurance Program, or NFIP, FEMA created Risk Rating 2.0, aiming to replace the previous flood-zone categorizations with more accurate risk assessments. Risk Rating 2.0 uses catastrophe models, actuarial science and private-sector data sets to determine risk-based pricing.
It’s estimated the new methodology, fully implemented in April, raises insurance premiums for about 77% of policyholders. NFIP insures about 5 million households.
In response, Louisiana, Florida, Idaho, Kentucky, Mississippi, Montana, North Dakota, South Carolina, Texas and Virginia, along with dozens of Louisiana local governments and levee districts, have gone to court to fight Risk Rating 2.0. On September 14, a federal hearing for a preliminary injunction lasted six hours.
The lawsuit, filed June 1, alleges that FEMA’s changes “flout federal law, are arbitrary and capricious, and were enacted illegally.” The plaintiffs say FEMA has overstepped its authority and that its new pricing does not properly account for community flood mitigation efforts, such as the building of dams and levees.
“FEMA has congressional authority to make changes, but what we’re saying is that it’s not okay to make such dramatic changes to the program,” says Liz Murrill, the solicitor general for the state of Louisiana. “It’s so different that it’s causing people to drop out of flood insurance.”
Furthermore, Louisiana Attorney General Jeff Landry, who is leading the lawsuit, accuses FEMA of being secretive about its methodology to assess risk.
But Meg Galloway, a registered professional engineer and senior policy advisor for the Association of State Floodplain Managers, says the issue is not that simple. The reason for the lack of transparency, she notes, is that “much of the 2.0 rating engine relies on proprietary data models from the private sector.”
