Flood insurance program comes with concerns

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Photo by Jill Burrow from Pexels


A Southwest Florida insurance broker has shared his concerns about the new federal flood insurance program with Congressman Byron Donalds. 

About 1.7 million Floridians with flood insurance will see a new federal system raise their rates by at least 150%, according to several prominent Southwest Florida insurance brokers. 

FEMA’S National Flood Insurance Program (NFIP) recently revealed the new rating platform called Risk Rating 2.0. 

Effective Oct. 1 of this year for new policy holders, it replaces a program that has been in place for more than 50 years. 

The new program will take effect April 1 of next year for all existing policyholders. 

Brian Chapman, owner of Chapman Insurance Agency, shared his concerns in a letter he sent to Congressman Byron Donalds. 

“Every policy (not even one exception to this) that we have prepared for new policy holders with an effective date after Oct. 1 has seen AT LEAST a 150% rate increase,” Chapman wrote. 

Chapman compared the prices under the old rating platform with Risk Rating 2.0. 

“We have seen an average rate increase of over 300% on policies we have quoted, and some polices over 1,000%,” Chapman wrote. 

Donalds, who represents much of Southwest Florida, read the letter. 

“It’s been on my radar,” Donalds told Gulfshore Business. “It’s a concern as a legislator for Florida. Members from several states have been affected by this rating change. We’re all kind of working together to provide some relief. 

“Florida would be adversely affected when it comes to rate increases. I don’t think it was the right way to run that program.” 

Ruth Villanueva, managing partner for the Culbertson Agency in Fort Myers, said she knew of a few real estate deals that have fallen through because of the new rating system. 

“We have quoted $4,000-to-$6,000 flood premiums,” Villanueva said. “Prior to the new rating it, those would have been $800-to-$1,800.” 

The changes have dumbfounded Chapman, he said, because of the lack of communication behind them. 

I’m also looking at what’s unfolding here, and it doesn’t make sense,” Chapman said. “It’s not being explained. Information is not being given to us to explain why we are raising these rates. What is the reasoning? What are the calculations taking place to make these rates justifiable? Those questions are not being answered.” 

Michael Hart, FEMA’s media branch chief, said the new program will drop flood insurance premiums for about a quarter of flood insurance businesses, about a million policy holders. 

“The new rating methodology is correcting long-standing inequities in the current pricing scheme,” Hart said. “We can no longer continue to ignore the fact that some of our policyholders have been unjustly subsidizing other policyholders. 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.” 

Donalds, a Republican, said he disagreed with what he called “the majority party’s” response to climate change. 

“The only remedy has been increased energy costs to try and shock people into lowering their carbon footprint,” Donalds said. 

Chapman said he hoped Donalds and others in Congress would find a way to intervene. 

The rate increases would inject more money into his business, Chapman said, but they weren’t right. 

“We’re agents,” Chapman said. “We’re compensated based on the policies we write. Higher premiums mean more revenue, right? It’s a backward process. Some of my clients aren’t going to be able to afford this. 

“They’re not using that flood zone you’re in to develop the rate. They are using other things to develop the rate, but we don’t know what those are. It has nothing to do with your risk of flooding.” 

Increases for existing policy holders would take place gradually at a rate of 18% more each year until reaching the 2.0 amount, FEMA administrators said. New policy holders after Oct. 1 will be paying the full amounts.

“If you’re being told that somebody’s policy is going up, you know, tenfold?” David Maurstad, senior executive for FEMA’s National Flood Insurance Program, said during a conference call. “That’s can’t be the case for existing policy holders that we’ll be transitioning to risk rating 2.0 next year. 

“Also, we certainly are hearing examples that premiums are $5,000 or $10,000. And, you know, it seems that folks are thinking these examples are typical, and they’re not. These are some of the highest premiums being quoted.” 

But Villanueva has seen many instances of enormous rate increases under the new system. 

“We have seen anywhere from 5% to 900%-plus increases,” Villanueva said. “Example: Brian, your property sits at two-plus elevation difference. Your current premium is $572. Based on the new, 2.0 risk rating, your flood insurance would be $11,000.” 

The new risk system no longer uses flood zones (X, AE), or bases flood elevations in determining rates, Villanueva said. Instead, the new rating uses an algorithm to determine rates, with distance to flooding sources/flood types seeming to be the biggest component. 

“We have a client who is purchasing a home in an X zone, flood insurance not required by a mortgage company,” Villanueva said. “He was considering purchasing flood insurance. But based on the 2.0 risk rating, the quote increased from $572 to more than $5,000 due to the distance to the water.” 

The biggest impacts on the new policy will be on homebuyers closing after Oct. 1, the agents said. They will be locked into paying the full, re-written flood insurance rates. 

“These flood rates that we’re hearing are scary,” said Jason Jakus, the broker/owner of NextHome Advisors in Fort Myers. 

Jakus is also a director of the Royal Palm Coast Realtor Association, which has about 8,500 members. 

The association has urged its member agents and brokers to incorporate the new rating with potential home buyers. 

“It’s less buying power for the consumers,” Jakus said. “It becomes an affordability issue. We do a lot of great things to make Florida an affordable state to live in. But I fear that the actual increase of flood insurance could keep people from buying a house. 

“They look at the mortgage payment, the homeowner’s insurance, the homeowner’s association fee.  All of those things go into the affordability formula.  That $200 a month extra for flood insurance, we’re concerned about it, and rightfully so.” 

WINK-TV reporter Andryanna Sheppard contributed to this report. 


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