Legislature takes testimony on flood insurance rates

Talking to state legislators Wednesday about skyrocketing flood insurance rates, St. Charles Parish President V. J. St. Pierre choked back tears as he described the plight of an 81-year-old constituent who vowed to end her life if she lost her home because of skyrocketing premiums.

“It’s a criminal act that FEMA’s trying to impose throughout the country,” Pierre told the joint Louisiana House and Senate Insurance committees.

Pierre presides over a parish in which home values are dropping by as much as 30 percent.

He attributes much of that decrease to changes made in the federal insurance program that is leading to higher prices for policies that financial institutions require of many Louisiana property owners.

About 18,000 Louisiana policies have seen prices increase, some dramatically, since the beginning of the month.

Within the next year or two, most of the state’s nearly half-million flood insurance policies will cost more.

Exactly what legislators in Baton Rouge can do about the federal policy is unclear.

During a three-hour meeting, legislators vented, swapped harrowing stories about constituents’ predicaments and discussed compromises that would have to be debated on Capitol Hill. The only proactive thing legislators in Louisiana can do is try to apply political pressure from afar.

“I don’t know the answer to this. This is something that is not just about Louisiana,” said state Sen. Ronnie Johns, R-Sulphur. “This is going to affect this entire country, and it’s really going to disrupt people’s lives.”

Johns, who sells insurance for a living, said he knew of one customer whose annual flood insurance premium rose from $400 to $24,000.

At issue is the impact of congressional belt-tightening on the National Flood Insurance Program that provides coverage to half a million structures in Louisiana.

In order to become more financially self-sustainable, NFIP phased out the special status that limited premiums on many properties built decades ago, as well as increasing rates on newer properties. The changes started kicking in Oct. 1.

Don Cravins Jr., who works as chief of staff for Sen. Mary Landrieu, D-La., asked legislators Wednesday to pick up the phone and dial insurance committee chairmen in other states.

He said the rate increases hit people across the country, not just along Louisiana’s coast.

“Help us get this through. It’s hard to get people to agree on things in Washington,” said Cravins, who as a state senator chaired the Insurance Committee.

State Sen. Dan “Blade” Morrish, R-Jennings, the committee chairman, said he invited NFIP and the Federal Emergency Management Agency to attend Wednesday’s meeting.

Unfortunately, he said, the invitation was extended during the federal government shutdown, when travel money was frozen.

Garret Graves, the governor’s chief coastal adviser, said the NFIP generally has been financially solvent across the program’s history.

A downturn happened when hurricanes Katrina and Rita hit in 2005, he said.

Graves blamed the massive flooding from those storms on the failure of levees designed by the U.S. Army Corps of Engineers. The fallout of that failure, he said, i s being imposed on flood insurance ratepayers.

Jefferson Parish President John Young Jr. said a quarter of NFIP’s 480,000 policy holders in Louisiana live in his parish.

In neighboring St. Charles Parish, he said, home values already are being reduced by as much as 30 percent because of the rate changes.

“If you’re like me, your biggest investment is in your home,” Young said.

“That’s the American dream. … Home ownership is going to be taken away.”

Michael Hecht, CEO of Greater New Orleans Inc., an economic development organization, showed legislators snapshots of homes that will see tremendous increases in flood insurance rates.

He said a homeowner with a residence valued at $350,000 in Belle Chasse now will pay $15,184 a year in flood insurance instead of $412.

Hecht said homes that never flooded have an increased risk of 6,000 percent.

“This is not accurate. This is not risk-based. This is fantasy-based,” he said.

The senator said NFIP can display a cavalier attitude about situations like that.

“Yesterday, (NFIP) told me, ‘Sir, well maybe your client doesn’t need to live so close to the water,’ ” Johns said.

Several officials made the point that homes across Louisiana’s coasts are not beachfront condominiums that serve as vacation homes but the primary residences of working families.

They were built because they could be reasonably insured.

Hecht showed legislators a staircase of effects that will unfurl if rates are allowed to skyrocket, starting with properties that cannot be sold because of flood insurance costs and ending with economies being destroyed.

In between are property values falling to zero, owners losing everything and banks losing mortgage portfolios.

“The cure is going to kill the patient,” Hecht said.

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