As the National Flood Insurance Program heads toward insolvency, Congress must weigh whether and how to reauthorize the program and settle its $24.6 billion debt, which is expected to swell once Hurricane Harvey claims start pouring in.

What that means for policyholders is yet to be seen.

One particular concern is that it takes considerable arm twisting to make anyone participate in the program. While flood insurance is required of any property owner in a high-risk flood zone with a federally backed mortgage, people in lower-risk areas or who have paid off their mortgages are not required to carry the insurance, so many don't.

Only about 20 percent of Hurricane Harvey victims were covered, estimated Robert Hunter, director of insurance at the Consumer Federation of America. After Louisiana's flood last August, state officials concluded almost 70 percent of the roughly 68,000 affected homeowners lacked flood insurance. 

The most high-profile effort in recent years to make the NFIP viable focused on raising premiums on policy holders, though it was halted when it caused a real estate panic in coastal communities, including those in Louisiana.

Now that the program is up for renewal, some experts have advocated for making it solvent by bringing more policies into the fold, which would theoretically spread the cost and cover more people in the event of another disaster such as Harvey or last summer's flooding in Louisiana. That could be accomplished by combining flood and earthquake insurance or by updating the risk maps used by the Federal Emergency Management Agency, which have been criticized as nonspecific, out-of-date and generally insufficient to serve their purpose.

Others have called for policies that will open up the market to private insurers, or focusing more on how local communities develop, encouraging them to toughen standards to build for potential disasters.

Understanding risk

Jim Boyd, finance professor at LSU, said changing how people think about the NFIP could be helpful, given that the deep subsidies mask the real costs in the insurance program. 

"Somebody's not running this so-called insurance program correctly," he said. "That's maybe a government bail-out, not insurance."

If the federal government continues to subsidize the NFIP amidst more and more disasters that keep wracking up debt "I question whether the flood insurance program is going to survive," Boyd added.

From consumers' perspective, Hunter agreed NFIP isn't working, saying the goal should be moving coverage into the homeowner policy. Doing so would put all the disaster risks — fire, flood, earthquake and more — in one plan.

That kind of move would also put it in the hands of private companies rather than the federal government. Back in the 1960s when the NFIP was established, private companies couldn't model disaster risk, but now they can, Hunter argued.

He praised a proposal that would have raised rates on high-risk properties, but suggested a compromise he thought could appeal to insurance providers and the majority of policyholders.

The idea is the government can help companies account for disasters by letting them hold onto untaxed reserves, as long as the money is earmarked for the earthquake that may some day level San Francisco or the hurricane that destroys half of Florida. Likewise, they can look out for property owners by offering vouchers based on income rather than on location. That way, people who earn less than 120 percent of the average can get a hand on their insurance bill rather than the millionaires with beachfront mansions, Hunter said.

Federal leaders are interested in letting more private insurers into the market, said Tom Santos, vice president of federal affairs for the American Insurance Association.

However, the NFIP program and the 100-year floodplain used by FEMA skew people's perception of risk. Under the current maps, "you're either in or you're out" of a high-risk flood zone and compulsory coverage, Santos said.

Because property owners pay subsidized rates, they may not appreciate how much risk they're exposed to, he continued.

Santos wants to make better maps using technology such as LIDAR, which involves mounting lasers to aircraft to survey surface features. That way, property owners could get a more nuanced appreciation of their flood risk rather than relying on the binary of being in or out of the 100-year plain.

The state of Louisiana has discussed such a program. The Trump administration, however, has recommended cutting $190 million from FEMA's budget that would eliminate its mapping program. Hunter, of the Consumer Federation, was sharply critical of the proposal. The private market won't pick up the job because by and large it doesn't currently run its own flood insurance programs, he said.

"I don't expect much leadership from the White House right now," he said.

NFIP participation

Whether private companies want to insure all those people, and what rates to offer, is a separate question. The Biggert-Waters Act of 2012 began to increase premiums so policy holders started paying close to actuarial rates, but it was unpopular with flood-prone communities, especially after Hurricane Sandy blew through the northeast later that year. Congress reversed the rate hikes in 2014.

Asked if he expects Congress to push premiums up again as they reconsider the NFIP, Santos was diplomatic.

"Affordability is a key component to the debate," he said.

And, as of yet, it's too early to tell how Harvey will ultimately impact the debate.

U.S. Rep. Garret Graves, R-Baton Rouge, said the hurricane may make people across the country more aware of the threat of floods and empathetic with communities at risk.

"I think this is going to bring a lot of softened hearts to the table," he said. "This isn't just a sympathy program." 

Louisiana Insurance Commissioner Jim Donelon expects Hurricane Harvey to have as big an impact as Sandy did five years ago when the storm prompted the reversal of Biggert-Waters, which he said caused "hundreds of thousands of properties in Louisiana (to be) rendered worthless overnight."

Louisiana needs the program to support its coastal petrochemical and fishing industries and their employees, Donelon said.

"We're not a white sandy beach retirement coast like others. We're a working coast," he said.

Donelon is an enthusiastic supporter of combining earthquake and flood insurance, and he'd like everyone with a federally backed mortgage to be automatically enrolled in such a program, which he believes would make it self-sufficient.

After a disaster, property owners rush to buy flood insurance — for a few years. Before Hurricane Katrina, Louisiana had about 360,000 policies, Donelon said. After the hurricane, the number shot up to 495,000, but crept back down to 450,000 before last year's floods. Now, the number is again at about 490,000.

While some of the uptick is due to people buying policies as a condition of federal aid, those cases are "very small in number." Most of the new policies are from the Lafayette and Baton Rouge areas, people who saw the flooding in their local communities and opted into the program, the insurance commissioner said.

Still, even with the increases, most homeowners in those regions don't have flood insurance. East Baton Rouge Parish maintains relatively low participation, according to Louisiana Department of Insurance data. Before last summer's flood, only 13 percent of residential property owners had a policy. The number grew after the storm but only to 19 percent as of the end of 2016.

Badly flooded Livingston and Ascension have higher numbers; the insurance department estimated both parishes jumped from about a quarter participation to a third.

Building differently

Yet other experts believe the conversation should focus more on preventing floods in the first place, rather than directed mainly on how to pay people back after their homes have been destroyed.

"Insurance is a Band-Aid, and it doesn't solve the problem. The bottom line is we need to reduce flood losses," LSU engineering professor Carol Friedland said.

Only three ways exist to do that: improve drainage, build higher or accept that a home will flood and construct with flood-resistant material.

As insurers want to stop using the NFIP to inform risk assessment, Friedland wants to separate it from building standards. Many communities just require new homes are built to the level of the 100-year flood. While Baton Rouge requires new construction go a foot above that, other communities in the capital area are less strict.

However, mathematically, there's a 25 percent chance a home will flood during a 30-year mortgage if it is only built to the 100-year plain, Friedland pointed out.

"Is that acceptable? I don't think so," she said.

There are other problems.

"The hazard does not stop at the 100-year flood. What about the 120-year flood?" Friedland asked.

Finally, the maps — many of which are decades old — don't account for new development, subsidence and sea level rise. Friedland believes the so-called 100-year floodplains may actually only represent the 80-year plain.

"We are putting ourselves more at risk every day," she said. "We should be doing better." 

Boyd, the finance professor, said the system needs to take into account climate change. After last summer's flood, FEMA announced it wouldn't update the maps in Louisiana because the storm was considered a 500-year flood. However, Louisiana has suffered so many floods in the past few years that Boyd questioned whether officials are just using terms such as 500-year event to "placate" residents instead of having hard discussions about the frequency of those storms, especially against the backdrop of climate change.

"There's just something pretty screwy here in my mind," he said. "I wonder if we're not really chasing a cure instead of prevention."

Follow Steve Hardy on Twitter, @SteveRHardy.