Programs aimed at cutting flood insurance premiums by reducing risk have their pluses and minuses, but the positives deserve strong consideration from local governments.
FEMA administers the National Flood Insurance Program (NFIP) to make flood insurance available to many communities, as most standard home and property insurance policies do not cover losses from floods. In 2012, Congress passed the Flood Insurance Reform Act of 2012, which called on FEMA to raise flood insurance rates so that they better reflect flood risk. This has spurred concerns about people’s ability to afford flood insurance and maintain property values.
One program that strives to help make flood insurance more affordable and encourage communities to reduce flood risk is the Community Rating System (CRS), which began in 1990. Communities that participate in CRS receive a discount on flood insurance premiums. The more a community does to reduce flood risk, the larger the premium reduction. According to FEMA, CRS has three main goals: to reduce flood damage to insurable property, to strengthen the insurance aspects of the NFIP, and to encourage a more comprehensive approach to floodplain management.
CRS is a points-based system, where 500 points is required for participation. A community can earn CRS points by taking on actions from an approved list. These activities are broken up into four main categories (public information, mapping and regulations, flood damage reduction, and flood preparedness), and include everything from disseminating brochures with flood hazard information to developing mapping information.
Based on the number of points accrued, communities are assigned to one of ten CRS classes. Class 10 is for those who are not participating or who have less than 500 points. Class 9 communities, with 500-999 points, receive a 5% reduction, and Class 1 communities, with 4,500 points or more, receive a 45% reduction. The increasing reductions create incentives for communities to expand flood protection activities.
Despite the benefits, CRS communities represent only about 5% of the communities in the NFIP. Most communities that participate in CRS fall between Class 5 and Class 9. In New England, most participating communities fall between Class 7 and Class 9. Improving class takes time and resources, but for a program that has been around for nearly 25 years, there are surprisingly few communities at the top classes. Roseville, California is the only Class 1 community, inspired to take on the CRS after devastating floods, and its 45% reduction saves residents an average of $792 per plan. Additionally, only three communities have achieved a Class 2 rating. Tulsa, Oklahoma, which has creeks that cause flooding, saves residents an average of $514 per plan. Unincorporated King County, Washington, which focused on preserving floodplain open space, saves residents an average of $586. And Pierce County, Washington, which focused on public information, saves residents an average of $550.
Beyond premium reductions, FEMA argues the program has other benefits. These include improving public safety and awareness, facilitating easier comparison and evaluation with a standardized classification system, providing technical assistance, and focusing on maintaining measures to reduce risk.
Indeed, CRS does have major benefits, not least of which is the reduced premium. With the incentive to reduce flood risk, the program balances recognizing the real risks and costs of living in areas with flooding dangers, and also trying to make those communities more prepared and resilient. Acquisition and relocation are incentivized through CRS with high point rewards, as is preserving hazardous flood areas as open space, though the bulk of the program’s actions focus on reducing risk in areas that will remain inhabited. Additionally, FEMA offers free training for local officials and makes emergency management specialists available to support CRS applications.
However, the very low number of NFIP communities that participate in CRS suggests that there are obstacles to applying for and maintaining CRS status. Despite Tulsa’s success in CRS, overall interest in the program has been declining in Oklahoma, as local officials weigh the benefits and costs of implementing CRS. A major issue is limited local capacity. Communities that are already struggling to stretch budgets and personnel may not be able to take on the additional work required by CRS to benefit residents living in flood zones. This may be particularly problematic in cases where the residents of flood zones are those who are struggling with the added costs of flood insurance and are most in need of the premium reduction. Since individual residents cannot take steps to gain points, the community must rely on local officials to prioritize CRS.
Furthermore, upgrading levels is difficult and takes time. King County, for instance, went from being Class 10 when the program started in 1990 to Class 9 in 1992. It then took 15 years to work up to Class 2. That long time horizon may be discouraging to getting communities to apply. A 5% discount may not seem like much in comparison to the time and work required for a class upgrade, so communities may postpone their participation until they accrue enough points for a larger reduction.
Lastly, the number of communities participating, and especially the number of communities in the top classes, suggests that there may be a gap between national standards and local capacity. Though the cost of implementing CRS varies, communities have reported costs ranging from $10,000 to $20,000 and above, largely for disseminating information and developing maps. Some communities may be hesitant to proceed too far along with CRS, as it poses restrictions on development, such as elevation requirements.
Despite the challenges, CRS is an important tool. While local communities may have limited capacity, FEMA, too, can only do so much to reduce risk in communities across the country. CRS empowers local officials to take action, while also putting money back into the hands of residents. The challenge is to make the case to local residents and officials that participation in CRS is worthwhile. It is a big commitment, with the application likely taking significant time and resources, and it is an ongoing commitment, as communities must demonstrate they are maintaining measures to reduce risk and inform the public. Yet many of those actions are valuable, and even doable with the resources offered by FEMA and other agencies. While CRS may fairly not be a top priority for many communities, it is worth serious consideration.
Melia Ungson is the Roosevelt Institute | Campus Network Senior Fellow for Energy and Environment.