National Flood Insurance:

Marginal Impact on Flood Plain Development, Administrative Improvements Needed

CED-82-105: Published: Aug 16, 1982. Publicly Released: Sep 15, 1982.

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Pursuant to a congressional request, GAO examined whether: (1) the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), stimulated flood plain development; and (2) FEMA was adequately enforcing flood plain management regulations.

Coastal and barrier island communities are developing rapidly, because they offer many attractive features and opportunities for recreation and retirement. After studying six coastal communities and interviewing various federal, state, and local officials, GAO concluded that the availability of federal flood insurance is not the principal reason for flood plain development in these communities, but it does offer a marginal added incentive to development. GAO also found that FEMA monitoring of local communities' enforcement of flood plain management regulations has been inadequate. Additionally, GAO noted errors in designations of flood zones on which insurance rates were based. GAO observed that providing flood insurance and other federal assistance in extremely hazardous coastal areas subject to wave damage may be an undesirable public policy because of the high potential for loss of life and destruction of property.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FEMA follow-up on cases identified in the report resulted in the collection of $2,734 from 9 policyholders, and policy rating changes on 17 additional policies. In addition, FEMA hired contractors to help identify additional misrated properties. FEMA also revised the duties of claims adjustors to include detection of certain types of misratings.

    Recommendation: The Director, FEMA, should adjust current premiums on all policies found to be misrated.

    Agency Affected: Federal Emergency Management Agency

  2. Status: Closed - Implemented

    Comments: Policyholders were requested to provide the locations of insured properties, and many did so. However, FEMA officials now acknowledge that a significant number of policies still lack property addresses, but they are not willing to deny insurance to the policyholders.

    Recommendation: The Director, FEMA, should require the specific geographical location of insured property on all renewals.

    Agency Affected: Federal Emergency Management Agency

  3. Status: Closed - Not Implemented

    Comments: This recommendation was not adopted. Consequently, insureds are not being charged rates that reflect the risks if the applicable flood zone rating was changed. NFIP officials state that they do not want to penalize those whose homes were built to NFIP standards, and also that all policies are affected by rate increases that are consistent with a sound program.

    Recommendation: The Director, FEMA, should require insurance agents to rate policies, when renewed, in accordance with current flood insurance rate maps.

    Agency Affected: Federal Emergency Management Agency

  4. Status: Closed - Implemented

    Comments: FEMA completed several actions to implement this recommendation, including computerization of monitoring visit reports and prioritizing communities, and establishing a database of key property address and claims information to use in community monitoring and enforcement. FEMA updated the listing which ranks the communities needing compliance visits.

    Recommendation: The Director, FEMA, should establish a centralized control system to direct and guide the monitoring and enforcement program. This system should include the systematic selection and periodic updating of information on those communities in each region whose compliance with flood plain requirements is considered critical. These communities should receive priority for monitoring visits. The system should also include continuing evaluations of community visits to measure individual and overall community compliance and to evaluate the effectiveness of the monitoring program in each region.

    Agency Affected: Federal Emergency Management Agency

  5. Status: Closed - Implemented

    Comments: FEMA implemented several actions that respond to this recommendation. The FEMA 1986 Adjuster's Manual requires claims adjusters to check on the accuracy of property descriptions and report any discrepancies found.

    Recommendation: The Director, FEMA, should, to improve NFIP credibility and financial soundness, establish appropriate management controls to detect and correct flood zone misratings.

    Agency Affected: Federal Emergency Management Agency

  6. Status: Closed - Implemented

    Comments: Additional regional staff were recruited during fiscal year 1987 to provide more monitoring staff for regions 4 and 6. No savings have been projected.

    Recommendation: The Director, FEMA, should reallocate staff resources to increase monitoring activities in regions 4 (Atlanta) and 6 (Dallas).

    Agency Affected: Federal Emergency Management Agency

  7. Status: Closed - Implemented

    Comments: Policy guidance on community compliance was issued to FEMA regional offices in November 1984. In 1985, FEMA issued new regulations, to be in effect in 1986, that offered communities a probation period in which to take corrective action. FEMA issued a Community Compliance Program Guidance Manual in July 1986.

    Recommendation: The Director, FEMA, should issue a policy statement to regional offices and program participants setting out the FEMA position on suspending communities for failure to enforce required flood plain management regulations.

    Agency Affected: Federal Emergency Management Agency

  8. Status: Closed - Implemented

    Comments: FEMA attempted to address this recommendation through a change in insurance coverage. Also, FEMA attempted to develop standards for breakaway walls that can be adopted by the construction industry. This type of action is insufficient because it would not prohibit the addition of solid ground floor walls to beach structures after initial construction.

    Recommendation: The Director, FEMA, should appeal the Office of Management and Budget's denial of permission to issue the proposed regulation on breakaway walls to the Presidential Task Force on Regulatory Relief.

    Agency Affected: Federal Emergency Management Agency


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