Association for Public Policy Analysis & Management

In the US, the Community Rating system (CRS) of the National Flood Insurance Program (NFIP) provides incentive in the form of premium reduction to communities that undertake the flood management activities. A CRS participating community can choose to invest time and energy in one or more of the 19 flood management activities recognized by FEMA and obtain up to 45% reduction in flood insurance premium. In this paper, we perform a longitudinal analysis of all participating CRS communities over a period of 15 years (1998-2012) to answer some basic yet important questions such as: How does the distribution of communities look like across all CRS activities? Do the communities improve their CRS classes over time? How long does it take for CRS communities to move up in class? What’s the tenure in the CRS? Do many communities drop their participation after just a few years in a similar way that many residents drop their flood insurance coverage after just three of four years (Michel-Kerjan et al, 2012)? Overall we find that the CRS program works well. It keeps attracting more communities every year; the tenure is very high with 99% of participation communities remaining in the program from year to year. The distribution of scores across all communities has also improved overtime; the average number of activities communities are involved in increased by 20% between 1998 and 2012 (from 10 to 12, out of 18 possible ones). There are positive moves within activities as well.

Although a great incentive program and the participating communities performing well, out of the 22,000 NFIP communities in the United States only 1200 communities participate in the CRS program which is surprising. In order to explore the triggers and obstacles faced when deciding to join the CRS we interviewed few CRS coordinators in the US. According to most of the CRS coordinators one of the biggest triggers to join the program was the insurance premium discount. For others a recent hurricane or major flood event, having creditable activities already in place and just a matter of reporting them formally and the lead from their neighboring communities were the greatest triggers to join CRS. In regard to the obstacles, funding, especially for capital improvement plans, convincing management and city mayors about the benefits of CRS, educational challenges such as not knowing what gets them the credit and convincing the non-transient community never hit by a flood to participate were the main challenges. In this paper we further intend to statistically test whether the triggers and obstacles stated by the officials are the true drivers of CRS participation. Additionally, we also plan to test the levels of community involvement in the CRS as it relates to the NFIP policies.