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Norfolk nonprofit wants to change how we approach flood insurance

Flooding in Norfolk’s Hague neighborhood in May 2022.
Hampton Roads has one of the highest rates of risk from floods, like this one from May 2022 in Norfolk's Hague neighborhood, one the East Coast. (Photo: Katherine Hafner/WHRO)

Hampton Roads has one of the highest rates of sea level rise and flooding risk on the East Coast.

One tool residents can use to protect themselves financially is flood insurance, but there are many problems with the current system.

Norfolk’s RISE Resilience Innovations is hoping to help address them. The nonprofit gives out money to small groups to try out environmental solutions — using Hampton Roads as a testing ground.

WHRO spoke with executive director Paul Robinson about the nonprofit’s upcoming challenge, which will focus on improving local flood insurance.

This conversation has been edited for length and clarity.

WHRO: Flood insurance is something that’s been around for a long time. What are the issues you and RISE see with how it currently operates?

Paul Robinson: What we found in working with the insurance industry and the general public is that there’s a gap in flood insurance in that the flood insurance programs that are generally available to the community are not funded well enough to fully recover those homeowners or those property owners that are badly affected or have properties destroyed by flood.

Plus, too few people are actually adopting the insurance policies. In many cases, the homeowners don't realize they're not covered for flood events by their homeowner's insurance policy. There’s not enough people getting insured, and there's not enough money coming out of the insurance programs to cover the claims that are out there. So there's a gap. And the current National Flood Insurance Program that's run by FEMA is trying to keep up, but it’s really struggling.

I know RISE is focused on flood insurance for its latest upcoming challenge. Can you explain how the competition works and what you hope to accomplish with this one?

It’s a very broad and complicated area. But what we find is there are two sides to the equation. On the premium side, premiums are high and not enough people are taking out the policies. So our goal of the challenge is to bring down flood insurance premiums and payouts by 50%.

We go into the challenge with a detailed description of what the problem is and we’re looking for solutions. We don’t specify what those solutions should be, but we specify what areas that solutions are needed. We fund businesses, we give them a start to do a pilot project to demonstrate their capability.

Why is this area a good test bed — are there aspects to flood insurance that are unique to Hampton Roads, good or bad?

So there’s a couple of big nuggets out there that sort of raise eyebrows amongst people when you talk to them, both inside the industry and out. And on the insurance premium side, it’s that not enough people are getting flood insurance policies, even though they should.

The second thing is the billions of dollars of resilience infrastructure that has been put in place — and we’re talking walls and pumps and gates and you name it. There is not a clear relationship between the resilience infrastructure protecting a region or a community from the flooding event and relief on the flood insurance cost.

So this area is actually a unique opportunity here for a number of reasons. The city of Norfolk is planning a new floodwall and several new flood resilience improvements throughout the city. So we can get on the ground floor of this major resilience infrastructure implementation, with a view to how it can affect local insurance rates. To understand better how the reduction in the risk can be recognized in a reduction in insurance costs.

What else should people know about flood insurance, whether they already have a policy or not?

One way to think about the problem with flood insurance – if you look at car insurance, all drivers are required to have car insurance. And the insurance companies like that, it brings in money to protect themselves and to cover any claims.

However, only a small percentage of the property owners affected by flooding are getting flood insurance. That makes it very, very difficult for insurance companies and FEMA to run a viable program. When the people who are paying in are so few, and the payouts are required to be so large. If the only people who were likely to get into car accidents were the ones who got insurance, it would make it into a much less attractive insurance program than by spreading the risk amongst all drivers. And it’s exactly the same with flood insurance. And that’s the problem that’s being faced.

Read the original story on WHRO's website.