America's Next Great Insurance Crisis

Climate change affects everyone, but in the immediate aftermath of “natural” disasters, the poorest among us suffer the most. In Splinter’s new series, Fault Lines, we explore the many ways our society’s most vulnerable people get hurt by climate-related crises.

Linda Barrow, now in her 60s, has lived in the same yellow, one-story house in a rural town in central Florida since 1982. The home, where she raised her two daughters, is one of the 2.5 million Florida properties in the Federal Emergency Management Agency’s designated flood hazard zone. Before she retired, Barrow was an administrative assistant at an online university. Her husband was a truck driver for 22 years.

Barrow’s home is close to a creek that has overflowed from time to time in the last 35 years, though the house has never flooded. Still, she knew the risks and, until recently, she did what all responsible and upstanding homeowners in flood zones with federally regulated mortgages are supposed to do: She bought government-subsidized, privately administered insurance through the National Flood Insurance Plan. She paid her premiums “on time, and in full” for years, she says.

But in 2014, according to Barrow, two things happened: Her flood insurance premiums doubled to $700 a year, and her husband fell ill with acute myeloid leukemia, a cancer of the bone marrow and blood. The Barrows chose his medication over flood insurance.

Three years later, Irma hit. “For the first time,” Linda says, “we had to face the wrath of the flooding.”

The electricity went out. Flood water seeped over the sandbags the Barrows wedged next to the house. Water filled their home, up to a foot deep in some places. When it was over, they didn’t bother calling over an insurance adjuster—the bureaucratic foot soldiers, often contract employees during times of crisis, responsible for logging and estimating damages. Regular homeowners insurance certainly doesn’t cover a flood like this. Instead, they called their daughter, who set up a GoFundMe page. They hope to rebuild themselves, with some money, someday. If they can.

Irma became the most intense and long-lasting storm ever recorded, with 180 mph winds gusting for almost 40 hours in parts of Florida—the total rainfall in the state exceeded 10 trillion gallons. A few weeks earlier, Hurricane Harvey had dumped 33 trillion gallons of water on Texas and Louisiana. And in Puerto Rico, where definitive estimates haven’t yet been calculated but Maria is said to have set the territory back decades, two feet of rain fell in just under 24 hours.

This is exactly the kind of weather event no one wants to take responsibility for.

That’s a Biblical amount of water—the kind of mass flooding that stretches FEMA thin and shocks the already-flighty insurance industry into a defensive, penny-pinching crouch. Climate experts refer to the deluges of water accompanying tropical storms and other weather events as “big rain.” We’re expected to be getting a lot more of it, and there are two months of hurricane season still to come. But as has been pointed out repeatedly since Harvey started gaining speed and looped in the direction of Texas, this is exactly the kind of weather event no one wants to take responsibility for.

Flooding is already the most common natural disaster in the United States, according to FEMA, and flood events that incur more than $1 billion in damages are becoming more common every year. Since the late ‘60s, the National Flood Insurance Plan has paid out far more money in damages than it has taken in—and still, more than 80 percent of Houston residents weren’t covered. Which isn’t, despite Houston’s flood-prone development projects, as uncommon as it might seem: When Baton Rouge, Louisiana flooded last year only 1 in 8 residents there had this kind of coverage.

In order for the NFIP to continue, it’ll need to be extended by September 30: The Congressional order to extend it is widely expected to pass. But even with the plan firmly in place for almost 50 years, too few victims of climate change-affected flooding—particularly those who need the most help rebuilding—are adequately served by our patchwork of aid.

In the last five years, according to data recently analyzed by the AP, the number of flood insurance policies in Florida have fallen by around 15 percent—in places like Horseshoe Beach, a particularly vulnerable area where premiums can costs up to $4,000 a year, 78 percent of policies have been dropped since 2012. And in Puerto Rico, where the average salary is around $20,000 and far fewer people have financed mortgages on their homes, less than 1 percent of residents have policies that cover such catastrophic flooding—not that rebuilding Puerto Rico is the first thing on anyone’s minds, with the territory in the midst of a humanitarian crisis more than a week after the storm hit the island.

The national flood insurance program was hastily bolted onto the private insurance industry decades ago, as risk-averse companies stopped offering the kind of protection Americans needed the most. As the big rains keep coming and coverage relies on vanishing middle-class niceties like homeownership and bank-insured mortgages, this latest unsustainable insurance crisis will only get worse. The industry loves a pre-existing condition, as long as people have to pay—and lucky for them, the at-risk areas of the United States are going to be everywhere soon.

The only communities rising from the ashes are the ones with fancier assets they can continue to insure.

Last year, in one of the few studies to look at the demographic trends of who buys voluntary flood insurance, researchers at Texas A&M University identified a handful of factors: People who buy flood insurance are more highly educated. They live in expensive homes. They don’t think about the risk of flooding very often, but they do consider the money they pay insurance companies as relatively inconsequential.

Insurance companies will pay out for beachfront properties referred to as “severe repetitive loss properties”—valuable real estate that’s been flooded and rebuilt more than once—and reinsure it at a higher rate. Those homes have been estimated to make up less than 1 percent of policies, even as they account for a third of the money insurance companies are paying out. As Cain Burdeau, an Italian journalist who covered New Orleans’ rebuilding efforts extensively for the AP, points out, insurance companies love this system: Every time a disaster hits and premiums go up, the only communities rising from the ashes are the ones with fancier assets they can continue to insure.

Today, as adjusters representing policies both subsidized and wholly private are being bused in droves to Texas and Florida, we should already know how the story goes: For months after Katrina, you could drive through Louisiana and Mississippi and find handwritten signs reading “Fuck Allstate” and “State Farm Sucks.” In 2005, State Farm was later found to have defrauded the federal government, classifying wind damage as flood damage in order to avoid paying money to Katrina’s victims. Allstate settled with 280 Mississippi policy holders for an undisclosed sum. (The two agencies, together, are responsible for more than a third of homeowner’s insurance in Texas.)

More recently, NPR found that private insurance companies made $400 million following Superstorm Sandy in New York, doling out federal funds and jacking up premiums to keep themselves.

Yet this shameless, corrupt bureaucracy is still our plan as the crises keep hitting. FEMA is already overwhelmed. (“You can’t take a border protection specialist officer and have him do technical disaster damage assessment,” as Eric Holdeman, a former disaster expert from Washington, wrote this month, ignoring the more horrifying implications of putting an ICE agent on disaster duty.)

Recently, I spoke to Adam Hitchcock, a lifelong Houston resident and a water-proofer by trade. Hitchcock is 32. He doesn’t live in a flood zone, but he has homeowners insurance, and he says he knows his water damage: His company is responsible for everything from private homes to high-rises. He documented everything when the gutters in his home broke after the rain, and in the flood’s aftermath he was “running around like a chicken with his head cut off,” pumping water out of his city’s buildings, doing his job.

“I’m just blown away by the lack of compassion these companies have.”

But when the insurance adjuster came through, Hitchcock says the man surveyed the damage for 20 minutes and offered Hitchcock’s family a couple thousand dollars to replace the entire roof. FEMA couldn’t help them since technically they had insurance. And when Hitchcock applied for a Small Business Association “disaster loan,” as recommended by a FEMA agent, his criminal history—an unrelated felony 13 years ago—got him in trouble. He received a letter of denial that stated the association had been unable to prove his “good character.”

“It’s normal at this point to get denied for everything,” Hitchcock says. He’s says his neighbors on the other side of the highway, fleeing to their roofs to escape the water when the surge came, were often unable to get the money they needed to rebuild, too.

Meanwhile, the insurance industry is looking forward to premiums rising in the wake of storms like these. At a recent talk at Lloyds of London, one of the world’s largest reinsurance providers (the guys who insure the insurance companies), the firm’s chief executive addressed the storms, which are clearly on the industry’s mind. Sure, Lloyds would be paying out a lot of money during hurricane season, she said, but, but “almost in a perverse way,” in the longer term, the hurricanes “can benefit the sector.”

Hitchcock is still in his home, and he’s worried about his five-year-old, who’s getting sick from all the mold. They’re not sure when they’ll be able to get the money to fix the damage, and they thought they’d done everything right. “It would be one thing if it was a small storm, but the damage is so widespread, it should be no questions asked,” he says. “I’m just blown away by the lack of compassion these companies have.”