these beneficial functions (e.g., CDWR, 2005), many are still unquantified.
Better estimates of flood risk enable structures to be insured at appropriate levels, which benefits both individuals and the nation. Those for whom flood insurance is not mandatory will not be required to purchase it, while those who need or want it can purchase the right amount (e.g., Box 6.1). Two problems remain. First is the problem of those who need but do not carry flood insurance (e.g., owners of mortgage-free properties in the floodplain). Nationwide about half of the single-family homes in Special Flood Hazard Areas (SFHAs) are insured, although market penetration in the areas hit by the 2008 Midwest flood was less than 10 percent (coastal areas have higher participation) (Maurstad, 2008). Greater accuracy may lead to improved understanding of flood risk and ultimately to more widespread insurance coverage. In addition, insurance rates and coverage will be more accurate and consistent because the risk ratings will be more accurate and consistent. Second is the problem of moral hazard wherein the availability of flood insurance encourages people to build in places they might not otherwise. Accurate pricing of insurance premiums, relative to risk, may reduce this problem.
Numerous studies have analyzed the impacts of flooding, coastal storms, and the NFIP on property values (e.g., Montz and Tobin, 1988; Holoway and Burby, 1990; Chivers and Flores, 2002; Bin and Polasky, 2004; Hallstrom and Smith, 2005; Smith et al., 2006), although additional information is needed to connect property values and map accuracy. The impacts of more accurate maps on property values are both location specific and hard to measure. In cases where buildings in the floodplain are devalued relative to buildings in areas with lower flood risk, more accurate floodplain boundaries could either increase or decrease property values. An adverse impact could be lessened because the risk will be better understood and property values could be assessed at appropriate levels. More accurate maps may also be less costly to use because there will
Impact of Improved Flood Maps on Insurance
More accurate flood maps can increase or decrease insurance premiums of individual property owners, as the following examples from two counties in New Jersey illustrate. In Monmouth County, more accurate flood maps created using lidar (light detection and ranging) elevation data resulted in an additional 3,680 structures being redesignated as within the floodplain. The property owners with mortgages are now required to pay for flood insurance, causing financial hardship for some (e.g., people living on a fixed income). Passaic County flood maps were updated to include flood mitigation measures installed along Molly Ann’s Brook by the U.S. Army Corp of Engineers. The more accurate maps had the opposite effect of the revised Monmouth County maps, removing 56 homes and 6 commercial buildings from the floodplain designation and relieving many homeowners of the mandatory requirement for flood insurance.
SOURCE: S. Kempf, 2008, Community flood maps: A tale of two NJ cities, Association of State Floodplain Managers Newsletter, May.
be fewer questions about the accuracy or interpretation of the map in mortgage determinations.
The accuracy of flood maps changes with time and so do the benefits and costs. Costs are highest at the outset when flood-related data are being collected, modeled, and analyzed (Bernknopf et al., 1993; FEMA, 1997). The more detailed the flood study method, the greater are the data, modeling, and analysis demands, and the higher are the initial costs (Table 2.1). Costs can decrease significantly when maps exist and require only updates or reanalysis.
Maps created using state-of-the-art techniques and the most current information provide the best possible representation of flood hazard, at least for a short time. These accurate maps provide the immediate benefit of enabling society to better prepare for and respond to future flooding. Thereafter, development and changes in hydrology and hydraulics will degrade map accuracy, while mapping updates and incorporation of knowledge from previous flood events will increase map