1 FEDERAL EMERGENCY MANAGEMENT AGENCY + + + + + NATIONAL FLOOD INSURANCE PROGRAM eRATING FORUM + + + + + WEDNESDAY DECEMBER 13, 2000 + + + + + The Forum convened at 9:00 a.m. in the Horizon Ballroom, International D.C., Trade Center, Ronald Reagan Building, Insurance Washington, Edward Pasterick, Federal Administration, moderating. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 2 I-N-D-E-X Page Welcome JoAnn Howard, Federal Insurance Administrator Goals for an eRating System Edward Pasterick, Federal Insurance Administration Developing an eRating System: Building Elevation Data Matt Miller, Mitigation Directorate Using Existing Data to eRate Policies Bill Barton, Computer Sciences Corp. HAZUS Flood Loss Estimation Methodology Claire Drury and Paul Tertell, Mitigation Directorate New Ways to Collect Data to eRate Policies Dan Cotter, Transamerica Distributing an eRating System John Clayton, NCSI 23 4 12 44 89 124 194 Next Steps Edward Pasterick, Federal Insurance Administration 225 NEAL R. GROSS
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rating system is here. P-R-O-C-E-E-D-I-N-G-S (9:00 a.m.) MODERATOR PASTERICK: I am not sure that everybody We have a So let's However, we probably should take our seats. lot of material to cover and only so much time to do it. at least start to get organized, and pretty soon we will begin. ADMINISTRATOR HOWARD: On behalf of the Federal Do we Insurance Administration, I want to welcome you here today. not have the sound on? Now it is. Okay. Thank you for coming. for the 21st Century. Our topic today is rating As I prepared for today, I found myself thinking about something that happened about 500 years ago, and that's Columbus' departure for the New World. Don't get me wrong. rises to that level I am not saying that our of importance. I wasn't thinking about the magnitude so much as the pre-conditions that were set, which is today not many. Before Columbus sailed, Ferdinand and Isabella didn't say, now you go northwest 15 degrees and then take a turn. They didn't tell Columbus where to anchor, when and how to manage the sails. His only directive was to discover and bring back, and his only limitations were his dreams. NEAL R. GROSS
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promise. preconceptions discussion, So today, I am not going to speak long in this introduction, because what happens after me is the important part, of course. But I want us to know that we are all here to poke and I don't know where this discussion will take prod and discuss. us, and that's the thrill of discovery, isn't it? We began this day today or this process with no about the its route outcome. is open I to intend to frame and, the more but negotiations important, imagination. is to keep a promise. But we all know our destination, and that It's a promise that we are about in the flood insurance business, a promise that if nature's worst outcome strikes, we'll be there, but far more important than that, a promise that will transform America's coastlines and riverbanks and creeks, and that we will be there to help people recover financially. As we all know, technology is a complicated business, but I believe that complex systems flow best from simple precepts. So let me start with a little bit of what was in my mind as we started talking about this -- what was it, Ed? -- I guess, a year ago. I want to make the process as simple as the I want flood insurance to be easier to rate and obtain. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 I want flood plains to be safer, more prosperous, and to be put to beneficial use rather than being viewed as a threat. Because technology must be placed in the service of that promise rather than pursued for its own sake, our goal is to advance and not undermine the basic flood plain management objectives of this important program. Beyond that, I have no directives other than let's discover with no limit but our own dreams. As our discussion takes place today in the context of broad trends, both in government and in corporate spheres, one is that companies are concentrating their attention to do what they do best, and they are turning to others like you here today outside their core expertise. For example, eTrade, the online broker, is providing its customers with a rich array of information such as financial news, stock quotes, purchased from outside sources. Online grocery stores have emerged in which one company provides the shopping cart ordering system and payment system, another company provides the logistics, and yet another group provides fraud detection services. At NFIP, our expertise is flood insurance. It's keeping a promise, and I don't mind telling you, I think we do NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that pretty well. With just over 50 people, we are the largest mono-line insurance carrier in America, and we have 4 million policyholders. We have over $100 million a month in premium income, and with 50 people who give it their best and very, very good contracted services and partners. Without these strategic partners, the program would be nowhere near the success that it is. The old model of government, though, looked a lot like the old model of business where government was the chief architect, the builder, decorator and purchaser for every activity it undertook. A new way is taking hold, and one that makes government a consumer of other people's good ideas. How that role plays out in technology is just now being written, including our discussion here today. our story parallels the corporate experience. Here, too, Industries that not very long ago were in the business of selling goods and services are now in the business of selling information. Many services, for successful are in businesses the and of syndication aggregating example, business information rather than producing it. of opportunity for us. That's a significant area The syndication model, I think, is a very NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 interesting one, looking at what we are doing today. Just as Dave Barry produces a column, syndicates it, other newspapers take those columns from Dave Barry and other writers, aggregates them. another outsourced company You could even, in an instance, have take those combined stories, print them, and distribute them. I think that model is one that we can explore in this process today. as you know, and Information is the cornerstone of insurance, that's been especially clear with the digitization of flood maps. We rate policies based on flood maps, elevations and a broad range of other factors that drill down not just to each community but to each unique property. Right now, no one entity has all of that information in the most usable form, but a lot of entities, you here today, have pieces of it. For example, one entity might not know the elevation of a structure, but they might have information on its tax valuation. A utility company might not even be thinking about flood insurance, but their highly detailed maps for utility lines might be invaluable to us. One reason we organized this session was our hunch that different people who possess different pieces of information NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 may be sitting next to each other here today and discovering new opportunities today. I think there is a huge market opportunity for whoever is the first to aggregate this kind of information, and NFIP may be only one consumer of it. So, as so often happens in the new economy, our information, new information may generate new industries. As purchasers of ideas, we may participate in that development. Maybe we would simply provide the specs and state the goal. It could be that we need to change the rating system to make it more conducive to electronic processing. For example, we need to know how much a property is elevated based on what flood maps tell us its risk is, but we may not need to know to the inch how high the foundation is poured. If you sense that I am laying out something that is so broad and general, it's because I intend to. where today's discussion will take us. I know I don't know that we are determined to keep a promise, and that is we want to make the process as simple as the promise has always been. I have been told this several times, that when Lyndon Johnson applied to teach at San Marcos State University in Texas, he wanted to teach geography. teach it. They said, tell us how you He said, I can teach it round or flat, however you want NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it. So, we have no preconceived idea on how this is going to come together, and that makes some people a little uneasy. I think it should be very encouraging that a process can be opened up like this. So allow me to formally open the discussion, and let's go back to Columbus with a story five centuries old. he set sail, his destination was India. When He wasn't looking for what he found, but what he discovered exceeded his dreams. So maybe that's the way it is going to be with us today. We start with only one directive, to discover, and only Hoist the mainsails. Anchors aweigh. one limitation, our dreams. A new world of opportunity is right ahead. (Applause.) MODERATOR PASTERICK: One Thank you. of the advantages sometimes of speaking second is that the first person does most of your job for you. I think my qualifications for overseeing this entire process probably have more to do with the fact that I have been around longest or second longest anyway to hearing about how complex the National Flood Insurance Program is. So maybe because I have heard it more as much as anybody else here, I have been charged with overseeing an exercise NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 which maybe is directed toward making it simpler. My job in the immediate is to give a little background on what we are doing here today. JoAnn has given you a Maybe I great deal of the broad direction we would like to go in. will be a little bit more specific in terms of our immediate exercise today, some of the rules of the road and where we go from here, as well as being a bit of a traffic cop or organizer, because one of the things that we are hoping is that we have a fairly wide ranging discussion today. To the extent that it will be wide ranging, we may need periodically to kind of rein ourselves in or at least be sure that we try to cover as many of the issues as we have planned. The agenda that we have today is a somewhat loose one. It is deliberately loose. It is really structured around the issues that were published in the Commerce Business Daily and in the Federal Register. I don't want to make too many assumptions. the people here are familiar with -very familiar Most of with the National Flood Insurance Program as well as the process that we follow for rating flood insurance policies, but maybe just to give some -- again, some additional framework to what we'll be talking about today. NEAL R. GROSS
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people that Right now, I need to organize my notes. I have to tell you that when I prepare, I drive everybody crazy, because I never have planned lines, notes and prepared speeches. I make the So, it last outline about four minutes before I go up and talk. usually comes off, but if it doesn't, then you can complain about me. We don't have any comment sections, remarks or feedback for this session, but one of the challenges around this whole session is trying not to talk too much. We really have a number of set presentations for you, but we want to leave a lot of time for comment and discussion from the group. I will also say this. are going to come up We will have three or four here and make specific presentations. If there is anybody who is so moved that they are prepared to come up and make additional presentations during the course of the day, I would welcome that. see that happen. Again, just a couple of other rules. When you do We really would like to ask questions or make comments, we would ask that you identify yourself. I think it is important that we keep and be aware of all of the various people out there that can serve as resources for us in trying to come to some solution to what we regard to be NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 a significant issue that surrounds the wide distribution of flood insurance coverage in this country. We don't have times on the agenda. I would think that, just as an estimate, we will probably get through maybe the three presentations this morning and then break for lunch. This facility is a very good facility, because there are a number of places that we can conveniently get something to eat. coffee in back, but we didn't prepare any lunches. your own. Then we will decide a convenient time to break somewhere around noon, and then come back in the afternoon and finish around three. If it spills over, as I'm actually hoping it We have So, you are on might for a while because I think there's a lot to talk about, we are prepared to stay around for as long as you are prepared to keep talking to us. Let's see. What other kinds of -- I just need to Claudia make two notes of personal appreciation and thanks. Murphy of my staff and Jackie Taylor were the two people that were mostly responsible for setting up this whole session, and I really, really want to express my appreciation to them. Right now, we have a process for -a rating process on policies that relies on securing certain risk data from NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 various sources. Apart from the challenge of bringing together these data for ready use by an insurance agent, there are issues that relate to the data themselves. At the risk of oversimplifying our rating process, there are really three critical pieces of information that an agent needs to know in order to rate a flood insurance policy. One, of course, is what kind of a building is he or she insuring. The relevant characteristics there have a great deal to do with whether it's one-story or two-story, whether it has a basement, and various things like attached garages and the like. Again, some building description and the kind of facility being insured is a critical piece of information. The second critical piece of information is where is that building located relative to the flood risk. That information is generally contained on the flood insurance rate maps that are the result of flood insurance rate studies that FEMA has been conducting for approximately 30 years now. There are various issues surrounding the data contained in those maps, one having to do with the age of the maps and the data, another having to do with the costs associated with keeping them updated, and of course, when you are talking about age of data, you are also talking about the issue of accuracy of NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that data. Of course, the other issue that we are dealing with immediately today is also the matter of making that data readily accessible. I think we have made great strides in making that data, those data -- I'm never sure; actually, data is a plural term. I'm going to step back in my classical education now. The singular is datum; the plural is data, and I go crazy trying to figure out whether I should say those data or that data. probably slip between the two. make-up. Anyway, we've made great strides in making flood risk data available to the public. Primarily, the focus has been So, I'll This is just my anal emotional on lenders who are required to know a location of a structure before approving a mortgage, but we have also made a lot more strides in terms of making it available to insurance agents. The third, of course, pieces of information that, I have to say, has been most problematic for us in terms of both securing and making readily accessible, is the elevation of the lowest floor of the building that we are insuring. Our primary piece of risk information that is critical to understanding the rate that needs to be applied to a flood insurance policy has to do with how high or low the lowest NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 floor of a structure is relative to the flood risk. That piece of information right now is provided by way of a piece of paper, basically, that is prepared by an engineer or a survey that is called an Elevation Certificate, and it has a lot of valuable information on it that an agent needs to secure in order to write a policy. Agents, to be perfectly straightforward about it, are very frustrated with the notion of having to get an elevation certificate, because it's not the kind of thing that they are traditionally -- it's not the kind of thing they have to do in their other lines of insurance. Therefore, we have challenged them to try to write flood insurance in ways that are somewhat different from how they write their other lines. We've spent a lot of time trying to convince them that it is really worth their time and effort to learn how to do it and to do it just the way we would like them to do it. We have also spent a lot of time and effort hearing them say -- if not say it out loud, or at least tell us by their actions that they are not prepared to go to the lengths we would like them to go to rate flood insurance policies. So what we are trying to get to is a point at which we can maybe make it a little simpler for them. Anyway, that NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 piece of information is important to the rating process. The other aspect, another very important issue that we need to keep in mind, is the fact that in the flood insurance program, somewhat other lines of insurance, we have a direct reinforcement through the insurance rating process of enforcement of local building standards that we ask communities to put into place as a precondition for coming into the program. The virtue of the flood insurance program -- and believe me, I have to talk to enough reporters and enough other individuals who challenge why in the world we try to even insure certain properties in the flood plain -- is that we are getting a significant trade-off from local communities for taking on risks that the insurance industry won't. The Wall Street Journal comes out practically every six months or so with some -- somebody gives them a comment about the program, and they say how crazy the government is for providing insurance where no private insurance company would ever provide it. It's true, because we provide insurance to properties, many properties, at a rate, which doesn't even closely reflect the risk to which they are exposed. We do that for a very important reason, and that is that the communities where those properties are located are, in fact, insuring that new structures NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 built in those communities are being built more safely, better, and more secure from flood risk. In fact, our actuarial experience shows us that that is happening. We are getting, in fact, the trade-off that we bargained for when the program was first put into place. So, any process that is directed toward trying to simplify and streamline the rating process for the program can't seriously or in any significant way threaten the reinforcement that the insurance process provides to compliance with local building standards. I had an e-mail yesterday from a surveyor in Louisiana who said he couldn't make it to this session, but he hoped that the interest of the surveyors and engineers would be represented here. His first comment was why are you trying to get rid of the elevation certificate. I said, well, you know, we are not trying to get rid of the elevation certificate. What we are trying to do is find some way of getting the information that is available through the elevation determination process more readily in the hands of insurance agents. To be honest with you, we don't have any particular interest in the paper on which an elevation certificate is NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 prepared. We have a lot of interest in the information that is on Now I don't mean to make that too overly simplistic, that paper. but in fact, the relevance of the elevation certificate is the information and not the paper on which it's written. Now again, right now we are geared to requiring that we have the piece of paper, although I guess there are probably areas where we are getting it electronically. I don't want to dwell on that, because we are going to be talking about some of that today. So, in general, those are the large issues that we are trying to address today, and hopefully, the agenda will cover through the course of their presentation pieces of all of this. We may not cover absolutely everything. I don't necessarily believe this is the last of this kind of session that we will be engaged in. something from this session will feed into some Hopefully following sessions, and we can keep moving toward some possible solution. So all of that said, I am going to introduce our first speaker, who is Matt Miller from our Mitigation Directorate in FEMA. He is going to talk about those maps that you are all familiar with. What he is going to say, I have no idea, but that's NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the mystery and joy of this whole session. MR. MILLER: There is a building in Noble's bookstore. Thank you very much. Bethesda, Maryland. Good morning. It's Barnes and Has anyone been there? I need to confess this, because along the foundation of that building, there are wise sayings, and I have plagiarized every inch of that foundation, and you can get away with it if you speak at least 100 miles outside the Beltway. So, I'm going to have to confess that any quotes I use today, I stole from that building. For instance, Soren Kirkegaard is quoted there as saying, "Life is lived forward and understood backwards." would like you to all think I'm that well read, but I'm not. Now I It's a problem, but I do want to talk a little bit about the history of our mapping program, because I think it will help us understand where we are going. This is my son's science fair project that's coming up here. I just drive around the Beltway talking, it seems. Yesterday I was late, pulled up where I was supposed to be, and locked my keys in the car, and we'll see if we do better this morning. I want to briefly talk about the history of our mapping program and where we got where we are. Then I think that NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 will be a jumping off place for maybe e-commerce discussions later on. I was giving a presentation -- Dr. David Maune is here. He's the distinguished looking guy halfway back. Before the presentation started Dr. Maune and I were huddled together, and I'm sure the people in the audience thought that we were just talking about geography or something, but we were really trying to figure out where the down-button was, because we are both very nearsighted here. I've got that located now, and I'll go on. We have used this graphic as sort of a poster child for a map modernization initiative. called a scriber. The left-hand side is what's It looks like a little magnifying glass, and you use this device to scrape a line on a piece of plastic. You scrape enough lines that people -- in enough pieces of plastic and stack them together, and that's how you make a flood map. That was state of the art in 1968, and most of our inventory was made using that device on the left. On the right, we have a digitizer. That is how you It sort of We trace a line and enter the data into a computer. symbolizes where we are trying to go with our mapping program. have -- I think it's called a legacy problem in the industry. We have about 100,000 flood maps that were made NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 with that scriber. It's dumb data. You can't answer questions. You can't send it over a phone line, and we need to convert to a digital format so we can. I want to make four points today. I want to talk a little bit about how flood maps are made and then talk again about the history of our program. I think it takes a little gall to say this, but I'll say it again. What is the purpose of NFIP? No matter what administration we have, be it a Republican or a Democrat, we pretty much agree that the purpose of the National Flood Insurance Program is, one, provide flood insurance to citizens to protect against catastrophic loses; secondly, a risk assessment program to identify the hazardous areas of the nation from flooding; and lastly, a basis for flood plain management regulations. The mapping is where I work, and I think it's an essential part of this three-legged stool. The special hazard area is the area of the flood plain we map. It's the one percent flood plain. There's a one If percent chance you will have a flood there in any given year. you have a 30-year mortgage, there's about a 26 percent chance you will have a 100-year flood. It has been subject of some debate very recently. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 At the time that the one percent standard was adopted, it was a compromise. There were people who wanted a 50-year standard and So, it was a compromise. It's in the middle. others a 500-year. But as we have had catastrophic events in the past decade, there are those who are questioning the adequacy of the one percent standard. Our flood studies were done primarily with -- by hiring other Federal agencies and by contracting with local firms in communities. We are changing a little bit the way we are doing business, and I'll talk about that more in a minute. Here is our budget, and this is the funding problem our mapping program faces. that spent. dollars. You see that our heyday was at the late seventies, and since about the early eighties our budget has basically been frozen. What that means is, it's declining. We had a very good The red line represents actual dollars The green line is those dollars adjusted to 1997 blip this year, and I'll talk about that in a moment. Wherever I see a flood -- somebody who sells flood insurance for us, I always thank them. me, I always introduce them. part of our family's salary. If my children are with They say this gentleman is paying NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Ninety percent of the funds that run the mapping program come from the sale of flood insurance. Every time a flood policy is sold, 30 bucks goes in a pot, and that pays program expenses. About ten percent we collect in fees from the sale of flood maps, from charging for our engineering reviews, but most of the money comes from the sale of flood insurance. About two years ago, our mapping program got a line item in the President's budget, and we were seeking substantial funding of about $170 million. foot in the door. We got $5 million, but we got our This year we received funding in addition to So, I'll talk a little bit the fee income of about $32 million. more about that later. How do you make a FIRM? Now some of you smart people in the back are saying my FIRM doesn't look like that. Well, you're right. products. These are the components of our newer map But on the left, you will see a base map. Now a base map, when we started our program, we used USGS quadrangles, and in many ways, I wish we had never deviated from that. We used topographic information -- that means elevations of ground -- to map elevation data, flood elevation data. The flood data itself, we compute using hydrologic NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 and hydraulic models. We put it altogether, and we get a flood insurance rate map at the bottom. Here's a process for our mapping, which I won't dwell on. Eighty I think this is interesting, the cost of our program. of our costs are in actual data collection percent analysis. If you'll notice, only two percent is printing and distribution, and in any e-commerce solution, that's where we really need to do better in our mapping program. We need to make those data available to the people -- to the end user. The original maps -- Mike Buckley, my boss, talks about them about them being made with hammer and chisel. not quite right, but they were done rapidly. emergency maps. That's We called them They are in an 11 x 14 format, and they only showed A-zones, no base elevations, just the rough outline of the 100-year flood boundary. The flood insurance rate maps were born after the reform legislation in 1972, which made the purchase of flood insurance mandatory if you had a federally guaranteed loan. we made the larger E-frame format. the maps, and we added floodways. The floodway is the channel of the stream in the adjacent flood plain that must remain open in order to pass Then We added flood elevations to NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 floodwaters downstream. The primary source for the base map, which is what we lay the flood down on top of, was quads and then some community base maps. We started a slippery slope at that time. Because the USGS base maps did not have enough detail to locate a structure, the FEMA mapping program started adding detail. We started making what is called kiss plates and adding more detail on the flood plains. When we did that, we introduced inaccuracies in our mapping, and we really started making graphics instead of maps, if you think about it. We are suffering from that today. I guess it's an What are our accomplishments? accomplishment to spend over a billion dollars, but we'll claim it. We've made flood hazard maps for almost 20,000 communities. We have produced about 100,000 flood maps. We communities. have done detailed studies for 12,000 A detailed study is one in which we actually compute the flood elevations in that community. Where we are now: In 1986, we started making digital flood insurance rate maps. legacy problem. Now we have what we call a We have about 100,000 flood maps, and we revise So you see, we have a long way to go about 4,000 a year at most. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 before we convert the inventory of manual maps. I don't need to probably sell you on the advantages of digital flood data. We have Q-3 flood data. did the name Q-3 come from. named the Q-3 flood data. Many people ask me where Dan Dan Cotter is halfway back. It stands for quality level 3, and intuitively we are going to have quality level 2 and quality level 1 data, but Dan Cotter developed this product. I have to say about Dan's ideas it that generally I understand how good his ideas were about ten years after he came up with them. But this was how FEMA really got -- how we produced a lot of digital data very quickly. The Q3 data is the outline of the 100-year flood plain. It does not contain flood elevations, but it's vector data, which means that it's suitable for importation into GIS models, and we've covered about 95 percent of our policies in force, and we have about, I think, almost 40,000 math panels of Q3 data. The one limitation for eRating is that it can't be used to write a policy. It does not have baseline elevations on it, though it's useful in the FIA for screening policies, for looking at actuarial soundness of the program, but it doesn't take us where we need to go. NEAL R. GROSS
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of that. I want to talk about the challenges facing our mapping program. First is the age, and Ed alluded to this. Over half our maps are at least over ten years old. When I moved here in 1980, Loudon County was farm land, and today it is the second fastest growing county in the nation, and our flood maps reflect the rural condition, I'm sad to say. Things change. This is a great -- a good example When we did the flood study in 1976, the data we had ended right here, and here was our estimate of the 100-year flood discharge, about 55,000 cubic feet per second. If we add in the data up to the present, we now know that the discharge should be over 70,000 cubic feet per second. That's a tremendous change, and our maps frequently don't reflect that. Base maps are sort of a no-brainer, but when you have development flood plain and your maps don't keep up with it, you can't locate yourself. Here's an example of that. The red information indicates the additional roads in the flood plain. When companies lose track of their inventory, they generally go bankrupt. If you don't know what you've got in the warehouse, you don't know how much borrowed money you are using to NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 support that inventory, you tend to go out of business. We lost control of our inventory. really the age of our maps. updated. We didn't know We didn't know how many needed to be We are now in the second cycle of a five-year cycle in which we review the accuracy of our maps, and this is very good, because it's giving us a handle on the age of the inventory and what needs to be done. This was from our first cycle of updates. are the projects we came up with. 20,000 of our maps needed to have the flood data updated. I showed you that graph of the flood discharges. What's that? we've had 19,000 These need map maintenance only. out of date. You know, Well, the base map is development that's not reflecting the base maps. For 41,000, we estimate we just need additional conversion. The data is adequate, but we just need to change it from a manual to a digital format. We estimate that we have about 14,000 unmapped -about 3,000 unmapped communities, which totals about 14,000 panels we need to make. About three years ago, the Director, Director James Lee Witt, noticed the mapping program, and it was wonderful. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Previous to that, most Directors -- we were just an irritation to them, and Director Witt said I'd like to know how much it would cost and how long it would take to make the flood plain mapping program what it should be. We asked him for eight weeks to do that, and we wrote a plan. It wasn't rocket science. It was just talking to our constituencies and talking to people with knowledge of our mapping program, and we proposed several things. We proposed, one, reissuing the maps in a digital format. We proposed flood data updates where we needed to do We proposed that, and we proposed an aggressive outreach program. to do it over seven years at a cost of about $750 million. The Director initially balked at that. like you to demonstrate to me that this is beneficial. He said I'd So, we did a detailed benefit/cost analysis, and our conclusions were that better mapping would pay for itself in reduced flood losses. Another component of our map modernization program was our cooperating technical communities program, which we were changing to cooperating technical partners. This is working with local communities and states to tap local expertise, to use their resources and their expertise. This takes advantage of their resources, but also it NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 gives them ownership of the flood maps. Probably one of our best examples is a partnership we started with the state of North Carolina last year after Hurricane Floyd. Floods, in one way, are our greatest friends, because they capture people's attention. with a 2 x 4. It's like hitting a mule After Hurricane Floyd, the state of North Carolina The state has proposed a $60 realized they had a real problem. million program statewide, and they have already started mapping the first third of the state. North Carolina has thrown in about $26 million, and, we have thrown in $1 million of our flood money and about $5 million from the disaster relief fund, and that's a great cost share. The state proposes to restudy the entire -- all flooding sources in the state, and reissue them in a digital format. You saw this a few minutes ago, but these are the components of our map product. In lieu of the old USGS quad, we are using digital or the quarter quads as our default base map. JoAnn People's Money. Howard talks about OPM. That's Other We need I talk about OPM as Other People's Maps. to not duplicate effort. We shouldn't make base maps where other Federal agencies and communities make them. We had a great deal of debate about a base map NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 source. In one sense, having a single standard base map would have been cheaper and easier for us or, better yet, not have a base map. But the political reality being what it is, when a community has spent a lot of money to develop their own base map, when they have tied their own tax collection to it, there's a great deal of pressure on us to use it. So when a community base map meets our standards for accuracy and currency and we can use it -- the licensing is adequate -- that's the base map we'll use. with our quarter quad is our default base. You are going to hear more about topography, and I won't dwell on this. One of the most expensive components of a The USGS information typically a five-foot Otherwise, the digital flood map is felt is the elevation data. used to be the best. It would have interval. online. Now the advanced technologies like Lion-R are coming We can do much better mapping at lower cost. We have wonderful tools now. I have a GPS unit in my car that gives accuracy of surveys that were unheard of, even using field instruments, you know, 20 years ago. This is what the new FIRM looks like. other people's data as much as possible. It uses It's fully digital, and it will be available through our Map Service Center. NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 I mentioned funding a little bit, but it works out to be about $750 million over seven years. We've been very That is very successful in one area of our map modernization program. coming up with new standards and products. We've been successful in the outreach. in our funding for that. We've been much less than successful We really needed about $110 million this year to launch the program, and we've come up with under $30 million, realistically. I think one of our other good successes is our digital distribution center or the FEMA store or the map service center, you may have heard it called. Right now, when I talk about the map service center, I let people know that it's next to a doughnut factory. It's a giant warehouse next to the Entenmann's plant near Rockville, Maryland. Our vision, our goal, is to migrate that warehouse from the big building by the doughnut factory to the Internet, and we are almost there. In January of this year, we are launching So, within our e-commerce site, and we are scanning our maps now. a year, we will also have all flood maps scanned and available on site for viewing and downloading. NEAL R. GROSS
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have. concurrent Now I need to talk a little bit about what's the difference between a scanned map and a vector product. A scanned map is just like, when you FAX someone a letter, you're making an image. It's a bunch of on/off, on/off, just a bunch of dots on It's dumb data, but it's digital, and you can send that the page. over the Internet, for instance. So, with what we are the doing better is scanning data. our If maps you developing vector understand that -- Dan Cotter will explain that later. There distribution center. are four main components of our digital I'm going to go through these very quickly and dwell on the last one. First of all, we had to change that warehouse. had to rebuild the back office, if you will. We Then we had to find state of the art technology to effectively collect money and take orders. The more exciting part, to me, is the products we Right now, if you called our map service center now and said I'd like to order a flood map for my house, they would say, well, what map panel do you want? live in Fairfax, Virginia. You would say, I don't know; I They would say, well, we'll mail you an index, and you figure out where you are and then call us back, NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 and we'll send you a flood map. Well, that's no way to sell flood maps. With the e-commerce site, you can order online or, if you don't have a computer and can't order online, you can call our map service center, and they will be able to take your -- to find out where you are and place your order immediately. I also mentioned that we are scanning our maps right now. Within a year, we'll have all of our inventory available online for viewing and downloading, and within probably two months, we'll have about 20,000 of those images up. You know, we've built this wonderful store, which represents a large investment. We are going to use FEMA. We'll use that for selling other products from the fire company products to FEMA hats. The idea is that will be the FEMA store. One challenge is pricing. You know we can't lose money, and some of our newer products, the color maps, cost more. We need to be careful that we are revenue neutral, at least. Another written for paper. is the law. For instance, laws were Laws were written for manually produced maps. It's a new world out there, and laws and regulations really haven't kept up with it. I am going to stop there, and take questions or NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 comments from you. Thank you. PASTERICK: There may be, during the MODERATOR course of the day, questions and, hopefully, we'll open it up to - There will be more discussion. One describe for of the that objectives, maybe aren't obviously, familiar here what is is to the those territory that we are dealing in. of risk data, flood risk data. The maps are a primary source Any solution that we have toward accessibility to that data, we need to understand what's going on in the world of map study and production. One of the things I didn't mention maybe in the opening comment was the fact that I suppose you can break down the alternative ways that we can go about addressing this problem into two broad categories. One is to find better ways of streamlining our current process, making it more user friendly for the most important users of the rating process. The other is to devise alternative strategies that still preserve the essential program objective. Our next speaker this morning -- Matt's purpose really was to lay out the status of the flood risk data, the nature and extent of the flood risk in given areas, and that NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 important piece of flood information. Bill Barton is Project Director for the NFIP Bureau and Statistical Agent, and is going to talk about another piece of risk information, and that is the lowest floor elevations that are really contained currently on a whole rest series in of individual various elevation locations. certificates, again, that actually Bill will address that, and then after Bill's presentation we will take a short break, and then we will have our final presentation after that, the final presentation of the morning after that. MR. BARTON: I'm keeping my fingers crossed. Everybody tested these things and they a all worked. lot of MODERATOR PASTERICK: before this whole session started, Obviously, the testing doesn't really make whole difference, because we kind of start from scratch every time somebody new comes up here. MR. BARTON: This should be interesting. We are calling a technician, and we'll see if we can go. But, I have to So, I'm have the slide show to remember what I'm