Daily torrential downpours.
Rushing water in the streets.
Southwest Florida is certainly no stranger to flooding or flood damage.
For decades, homeowners have relied on the Federal Emergency Management Agency for their flood insurance coverage because of lower prices. But now experts think the market is going to get more competitive, and more affordable rates may be possible with private insurance companies.
“I think that’s the greatest fear is like, you’re standing in your front door, and you see the water coming up from the street,” Brian Chapman, CEO of Chapman Insurance Group, said. “And then you see an hour later and it’s coming up another foot, and another hour later, it’s another foot and then (before) long, you know, you’re it’s in your house.”
Chapman through his company not only sells flood policies, but he also has to have one on his home. He is already seeing flood insurance quotes surging for people looking for coverage following FEMA updating the National Flood Insurance Program.
“Risk Rating 2.0 is a real estate deal killer. It will shut down deals from happening,” Chapman said. “I mean, you have somebody that comes here from Tennessee, Ohio, New York, and they’re looking at buying a house here, and they see a flood insurance rate for $7,000 on a house, that the deal’s probably not going to happen”
FEMA said Risk Rating 2.0 lays out a homeowner’s yearly flood insurance rate based on how likely that home would flood and how much it would cost to fix it. It looks at a specific home instead of the area where it’s located as in the past.
So those who live close to or on a canal would pay more than someone living a few blocks over.
“We can no longer continue to ignore the fact that some of our policyholders have been unjustly subsidizing other policyholders,” said David Maurstad, a senior executive with FEMA’s National Flood Insurance Program. “Policyholders with lower value homes that have been paying more than they should will no longer bear the cost for the policyholders with higher value homes who have been. They’ve been paying less than they should. Upgrading 2.0 fixes this injustice.”
FEMA projects more than a million homeowners across the country will see decreases in their rates thanks to Risk Rating 2.0
That may not be the case for most Floridians.
“Roughly 80% of all current flood insurance policyholders that are covered by FEMA’s National Flood Insurance Program, we are going to see some sort of increase,” Mark Friedlander of the Insurance Information Institute said.
Homeowners receiving new flood policies will have premiums based on Risk Rating 2.0. Anyone currently with coverage won’t see the price change until their policy renews, as well as after April 1, 2022.
But there is an 18% cap for increases until one reaches the amount FEMA says they should pay.
“It will take a relatively long period of time on the 18% glide path for them to reach their full risk rate,” Maurstad said.
For example, someone who pays $1,000 per year for flood insurance through FEMA’s program could see the National Flood Insurance Program require they pay $3,000 per year because they live on a canal.
When their policy renews their rate will increase 18% to $1,180. The rate will continue to increase by 18% until it hits the $3,000 mark.
“We all shake our heads and say, ‘If you’re trying to get the rate, right, this isn’t right,” Chapman said.
About 20% of Floridians will see a decrease in their flood insurance rates.
Friedlander thinks Risk Rating 2.0 will encourage people to look at other flood insurance options.
“The private flood market is larger in Florida than any other state,” Friedlander said. “So, there is an opportunity to shop your coverage. And this is a great time to do that.”