Bill Overview
Title: Flood Insurance Pricing Transparency Act
Description: This bill directs the Federal Emergency Management Agency (FEMA) to publish all formulas used by FEMA to calculate mitigation credits available to properties insured under the National Flood Insurance Program (NFIP). (Under current NFIP rating methodology, individuals can receive premium credits for mitigation activity on their property such as installing flood openings, elevating the structure, and elevating machinery and equipment above the lowest floor.) FEMA must also develop a publicly available tool that estimates NFIP premium rates based on user inputs, including the change in rates as a result of mitigation activities.
Sponsors: Sen. Cassidy, Bill [R-LA]
Target Audience
Population: People insured under the National Flood Insurance Program
Estimated Size: 5000000
- The National Flood Insurance Program (NFIP) has approximately 5 million policies across the United States.
- The bill impacts individuals with properties insured under the NFIP, particularly those who perform or plan to perform mitigation activities to reduce their insurance premiums.
- By making the NFIP price calculation formulas public, the bill affects all NFIP policyholders interested in understanding how their premiums are calculated and how mitigation activities could affect them.
- The global implication of insurance and actuarial transparency may extend to other global government insurance programs or influence similar transparency efforts outside the United States.
Reasoning
- The population distribution indicates that there are 5 million policies under the NFIP, primarily affecting property owners in flood-prone areas. Given this, the policy will directly impact individuals who are engaged in or willing to engage in mitigation activities to lower their insurance premiums.
- The policy's budget constraints call for a measured rollout, focusing initially on education and tool development to ensure maximum utility for participants looking to offset their flood risks through informed decision-making.
- Given the budget allocation, direct impacts will likely be uneven across different socioeconomic groups, with more pronounced benefits on individuals who can afford to implement mitigation strategies.
Simulated Interviews
Construction worker (Miami, FL)
Age: 45 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- This policy would allow me to better understand my flood insurance premiums.
- I plan on elevating my home's foundation in the next couple of years.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
School teacher (New Orleans, LA)
Age: 38 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Transparency would help me decide if buying a home here is a financially sound decision.
- Without this information, I'm hesitant to invest in property.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 4 |
| Year 2 | 4 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 5 | 4 |
| Year 10 | 5 | 4 |
| Year 20 | 5 | 4 |
Retired (Houston, TX)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 8/20
Statement of Opinion:
- Having access to the calculation formulas helps plan for long-term costs.
- I'll evaluate more mitigation efforts for my properties with this information.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Financial analyst (New York, NY)
Age: 29 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- I am curious about the transparency's application in the financial sector.
- Even though I am not directly affected, the policy may influence transparency in other insurance domains.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Small business owner (Sacramento, CA)
Age: 52 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- This policy would make it easier to decide if purchasing flood insurance is right for my business.
- Understanding impacts of mitigation on premiums could be a business decision factor.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Real estate agent (Charleston, SC)
Age: 47 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 9/20
Statement of Opinion:
- Clients would benefit hugely from this transparency.
- Could influence how properties are marketed and sold based on flood risk.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Student (Biloxi, MS)
Age: 25 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- It prepares me to understand the cost implications when I move out.
- I can take proactive steps knowing potential premium changes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Insurance broker (Fort Lauderdale, FL)
Age: 34 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- Would greatly benefit my clients by providing transparency in costs and rewards.
- It may increase client trust and policy uptake.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Artist (Nashville, TN)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- The policy provides clarity on how mitigation could lower my insurance expenses.
- Greater understanding motivates me to invest in property safety improvements.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Urban planner (Boston, MA)
Age: 43 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 13/20
Statement of Opinion:
- This could help municipalities plan better with accurate insurance cost estimates.
- It's an important step toward comprehensive urban flood management.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Cost Estimates
Year 1: $10000000 (Low: $8000000, High: $15000000)
Year 2: $5000000 (Low: $4000000, High: $8000000)
Year 3: $5000000 (Low: $4000000, High: $8000000)
Year 5: $5000000 (Low: $4000000, High: $8000000)
Year 10: $5000000 (Low: $4000000, High: $8000000)
Year 100: $5000000 (Low: $4000000, High: $8000000)
Key Considerations
- The primary concern is ensuring the accuracy and reliability of the NFIP premium estimation tool.
- Maintaining transparency while protecting sensitive data inputs and proprietary models may present challenges.
- The ability of policyholders to understand and utilize detailed information effectively depends on user interface and outreach efforts.