More than 16,000 Oklahomans might have to pay higher premiums for flood insurance after a federal report recommended an overhaul of the program that determines rates for such coverage.
The U.S. Government Accountability Office began looking into the issue after Hurricane Katrina left the National Flood Insurance Program with $17.4 billion in debt.
The study said that data used by the Federal Emergency Management Agency to calculate the rates for flood insurance in the U.S. was outdated and inaccurate, making it questionable whether those rates accurately reflected the risk of flood damage.
Oklahoma contributed to the program’s deficit, the report noted, with state residents receiving $25.6 million more in claims than they had paid into the program between 1978 and 2007. During that period, the state had seven years in which flood claims exceeded the premiums paid by property owners.
There are currently 16,289 flood insurance policies in place in Oklahoma, which provide $2.3 billion in coverage.
A rate increase could hurt small business owners, said Brian Walter, who owns Walter Building Center of Kingfisher. Walter’s store sits in a flood-prone area and most recently was flooded during August 2007, when the remnants of Tropical Storm Erin brought heavy rain to Oklahoma.
He said mortgage companies require that he and others in the area have the specialty insurance.
“If the rates are too high, people simply can’t afford it,” he said.
“They’ll either have to change their business model or pack up.”
State Insurance Commissioner Kim Holland said that it’s likely that because of the current economic downturn, a portion of the flood insurance program’s loss will be passed along to consumers.
Program spokesman Butch Kinerney said that there won’t be any dramatic rate changes for two years, but what might happen after that isn’t known. He said the program likely will see significant changes within the next year, with the rate structure being changed, a tax credit program being implemented and a catastrophic insurance pool being created.
Information from: The Oklahoman, www.newsok.com
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