Making key reforms to the National Flood Insurance Program

Rep. Nydia Velázquez has represented parts of Brooklyn and Queens in Congress for more than 30 years. She currently serves as the ranking Democrat on the House Small Business Committee, which oversees $200 billion in federal programs and contracts. She has also proposed legislation to reform the National Flood Insurance Program, which Congress could reauthorize next year. This interview has been edited for length and clarity.

Do states take the lead on insurance regulation, or is it addressed more on the federal level? How often do you interact with state and local policymakers on insurance issues? 

The McCarran-Ferguson Act specifically preserves states’ authority to regulate insurers. States have been chartering and regulating insurers as well as the products they offer for more than 150 years. It’s a system that I support and one that has served our country effectively for decades. But that does not mean the federal government doesn’t, and shouldn’t, have a role when it comes to insurance. For example, following the 2008-2009 financial crisis, the Dodd-Frank Act enhanced the Federal Reserve’s regulatory authority over systemic risk, including insurers, placed an “insurance-related expert” on the newly created Financial Stability Oversight Council and established the Federal Insurance Office within the Treasury Department to monitor all aspects of the insurance sector and advise the (Treasury) secretary on important national and international insurance matters. These were all reforms that I participated in and continue to support.

How well is New York doing in expanding insurance coverage to more New Yorkers? Better than most states? Room for improvement?

There is always room for improvement. I am constantly looking for ways to work with the state Department of Financial Services to expand insurance coverage for New Yorkers at more affordable rates. The rising cost of property/casualty and umbrella policies or the complete unavailability of these coverages is a problem that many affordable housing property managers, commercial property developers and small businesses are experiencing. Homeowners have also expressed similar concerns to me about their homeowners insurance. These are issues I have raised several times in Washington and am looking into what can be done on the federal level.

What notable legislation has come through the House Subcommittee on Housing and Insurance in recent years. Do you have any legislation at the moment that the subcommittee is considering?

Unfortunately, the House of Representatives has been under the Republicans’ control for the last two years, and during that time Republican leadership on the Financial Services Committee has chosen to ignore several important matters related to insurance. Particularly the impact climate change is having on insurance markets, the cost of coverage, or even the ability to obtain coverage at all. And what is happening in the insurance marketplace is having a broader impact on the economy – it’s making it harder for developers to build more affordable housing, entrepreneurs start a small business or working-class families to buy a home. But while the Republican leadership of the committee has chosen to ignore these problems, I will continue to advance solutions because I know many people are grappling with these issues right now. For the last several Congresses, the Financial Services Committee has supported my legislation, the National Flood Insurance Program Administrative Reform Act, with overwhelming bipartisan support. My bill makes a number of key reforms on how the National Flood Insurance Program processes a policyholder’s claim to address many of the delays and problems New Yorkers faced in the aftermath of Superstorm Sandy. It also establishes additional guardrails on insurers to prevent future instances of fraud like we saw take place after Sandy. I hope there is an opportunity to reengage on issues related to the NFIP next Congress, and I expect my bill to continue to be central to that conversation.

What, if anything, can the federal government do to address the impact of climate change on the insurance market and homeowners in New York and nationally? 

One of the most important ways the federal government can address the impact of climate change on the insurance market and reduce insurance costs for New Yorkers is by investing in pre-disaster mitigation projects and strategies. FEMA, the National Flood Insurance Program, the (Community Development Block Grant Disaster Recovery) Program and the Army Corps of Engineers either all contribute to projects or distribute grants that can be utilized by states and local communities to improve safety. We need the federal government to invest more heavily in these programs, and I’ve been leading the charge on the need for these additional investments in Congress for years. Insurance is all about risk. If the federal government can invest in these projects and programs and better protect our communities from the hurricanes, floods and wildfires in the West before they strike, insurance markets will accordingly adjust.

Does anything need to be done to reduce the costs of title insurance and/or police potentially collusive behavior by title insurance companies that raise costs for homeowners? 

Homeownership is at the heart of the American dream, and I know that homeownership is still too expensive for many working-class New Yorkers. While title insurance is essential to protecting homebuyers over their lifetime of homeownership, the price of title insurance and other costs at closing are creating barriers to entry for far too many individuals and families. I have met with representatives of the title insurance industry several times and expressed my concerns about these costs. Investments in technology and digitization can speed up the title search process and reduce these costs, and I am hopeful that we can continue to make these investments.

What can be done to shore up the National Flood Insurance Program, which is grappling with rising payouts? 

For the last several cycles, Congress has extended the authorization of the National Flood Insurance Program through continuing resolutions or end-of-the-year spending packages. We need to pass a long-term reauthorization and reform package. I’ve called for a 10-year reauthorization to provide certainty to both homeowners and industry that the program will continue to operate and provide coverage when disaster strikes. In the 116th Congress, the House Financial Services Committee unanimously passed two pieces of legislation, including my bill the National Flood Insurance Program Administrative Reform Act, to reform the program and grapple with many of the challenges it faces. I’m hoping these bills can act as a starting point in any future reform discussion we might have in Congress.

There’s proposed bipartisan legislation that would create a tax credit of up to $1,000 to help individuals and families afford flood insurance premiums. Is this enough?

Flood insurance coverage is still too costly for far too many people. And as storms and other weather-related flooding events become more prevalent and more severe due to climate change it is important to get businesses and homeowners covered. In the past, I have also proposed legislation to provide National Flood Insurance Program policyholders with a tax credit to make their monthly premium payments more manageable and entice people to get coverage. I need to study the details of Reps. Andrew Garbarino and Josh Gottheimer’s legislation to see if it makes sense. But affordability measures must be included in any comprehensive long-term reauthorization and reform package for me to support it.