Rotary Happenings: Flood insurance has undergone numerous changes since inception
At the start of hurricane season each year many property owners on Sanibel and Captiva check property insurance policies, including flood insurance coverage; reviewing policies and making sure everything is up-to-date and being aware of changes to flood insurance coverage and costs that have gone up in the last few years.
Sanibel-Captiva Rotary’s guest speaker this past week, Pete Travis, director of Client Growth at Torrent Technologies Corporation, focused his talk on flood insurance, the need, and some changes to flood insurance costs in recent years. Torrent Technologies Corporation provides insurance protection-above National Flood Insurance Protection, in conjunction with insurance companies (write your own policies companies) and lending institutions in the area of flood insurance, advising and providing policies for residential, commercial and condominium properties.
Previous to 1968, flood insurance was part of homeowners’ insurance policies, but after a number of flood disasters in the 1950s insurance companies started to exclude flood insurance from homeowners’ policies. Flood damage was now the responsibility of property owners with few exceptions. To address possible flood catastrophes both to properties and personal wealth government agencies built damns, levees, and other structure to help hold floodwaters back. That wasn’t enough. The government found itself providing public disaster aid to affected property owners. So, in 1968, the National Flood Insurance Act (NFIA) was passed. In turn, the NFIA created the National Flood Insurance Program (NFIP). NFIP provided flood insurance, floodplain management, and flood hazard mapping. Federal flood insurance was now available in areas where local governments adopted adequate floodplain management regulations. In 1973, an amendment to the NFIP included restrictions on lending agencies, the law-prohibited lenders that are federally regulated, supervised, or insured by federal agencies from lending money on property in a floodplain community without flood insurance.
NFIP is administered by the Federal Emergency Management Agency (FEMA). Flood insurance was initially only available through insurance agents working directly for the federal program.
Online flood issues article: “Since 1983, these policies can be provided through private/public collaborations and are known as “Write Your Own Policies” through which a pool of insurance companies issue policies and adjust flood claims on behalf of the federal government under their own names, charging the same premium as the direct program. Participating insurers receive and expense allowance for policies written and claims processed. The federal government retains responsibility for underwriting losses – $250,000 for structures, $100,000 for contents.”
So far, so good, but along comes a few catastrophic storms: Hurricane Andrew 1992 and Hurricane Katrina 2005, and Hurricane Sandy 2012. Things had to change; the NFIP had to borrow money from the U.S. Treasury Department to handle insurance claims and payback the money with interest. Flood insurance rates had to go up.
Therefore, in 2012, the Biggert-Waters Flood Insurance Reform Act attempted to make insurance rates actually reflect the expense of flood insurance payouts on properties insured. The 2012 law put a 5 percent surcharge on all but the lowest-risk policies to create a reserve fund to cushion against future losses. Formerly under-insured subsidized properties were to be phased out and surcharges enacted to reflex cost of insuring businesses, non-primary residences, structures with severe repeated flood losses. Rates for these groups were scheduled to increase by 25 percent per year until reflective rates were reached.
Immediately there were objections to Biggert-Waters and in 2014 this act was repealed and modified, refunding of insurance surcharge over-payments made during the period of the original Biggert-Waters went into effect. The new law phased in increases to the subsidies properties. Newly purchased subsidies properties were extended to new owners and payment of flood insurance rates set according to new rulings.
Surcharges remained of primary residence assessed $25 and other properties $250.
Grandfathered properties on flood maps during the time of 2012 Biggert-Water Act were to receive a 20 percent annual rate increase until grandfather properties were assessed full-risk rates. Under the 2014 changes, homes and businesses that were built to code, then remapped into a higher risk area will not receive a rate increase. Properties moving into special flood hazard areas would pay the subsidized premium in the first year, and then the rate increases assessed on all such properties would be between 5 percent annually, with no single property receiving more than an 18 percent increase. There are quite a few additional changes, mostly FEMA related.
Pete did address the issue of why some insured might not receive the amount of money they expect from their flood insurance policies. Make sure your policy reflexes the coverage you intend, make sure you comply with all stipulated policy covenants. Most of all make sure that you have a government certified “Write Your Own” flood insurance agent handle your flood insurance.
Sanibel-Captiva Rotary Friday morning breakfast meetings start at 7 a.m. Throughout the summer the club is now meeting at the Shell Museum, San-Cap Road. Guests are always welcome.