Effect of Premium Increases on Achieving the National Flood Insurance Program's Objectives

RCED-83-107: Published: Feb 28, 1983. Publicly Released: Mar 21, 1983.

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In response to a congressional request, GAO reviewed the impact which recent rate increases have had on individual and community participation in the National Flood Insurance Program.

GAO found that since the Federal Emergency Management Agency raised rates in January 1981 individual participation has declined. Participation fell from a peak of about 2,014,500 policies in December 1980 to about 1,860,400 in November 1982. GAO identified several factors in addition to the rate increases which could have contributed to the decline in individual participation. These factors included: (1) the decline in the housing market during the last few years; (2) the smaller number of floods and flood losses experienced in the last few years; and (3) the general economic recession. During this period, six small communities left the program. GAO found that none of the six communities left the program because of the rate increases. Rather, their reasons for leaving the program included the building restrictions imposed by the flood plain management criteria, a belief that there was not a need for flood insurance, and communities' dislike of having the federal government tell them what they could and could not do in their flood-prone areas.

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