Starting yesterday, insurance agents began assisting flood insurance policyholders with renewals carrying premiums that are significantly higher.
Thanks to changes made in the Homeowner Flood Insurance Affordability Act (HFIAA) in 2014, flood insurance clients are seeing premium increases ranging from 15% to 18% on primary residence properties, and increases of up to 25% on secondary homes or homes that have suffered repeated losses.
Policyholders must also deal with new surcharges: $25 for primary homes and $250 for all others.
The increases are part of Congress’s attempt to pay down some of the $24 billion debt incurred by the National Flood Insurance Program after large losses from Hurricane Katrina and Superstorm Sandy. Premiums will increase 25% per year, reducing the number of NFIP policies receiving premium subsidies, until they reflect the residence’s actual risk.
“I think this is big news,” Tom Heist IV, president of Thomas H. Heist Insurance Agency in Ocean City, N.J. told PressofAtlanticCity.com. “You could have people saying ‘I can’t afford to be in this house anymore.’”
Indeed, many policyholders in coastal areas are reporting their flood insurance bills are now more costly than their mortgages.
To relieve some of the sticker shock, many agents are remarketing client policies with alternative insurers on the private market. John Sutherland, a New Jersey agent with J. Graham Chesney-Stanton Insurance, is seeking coverage for his clients through Lloyd’s of London—often with dramatic results.
Sutherland told the same news outlet that one of his client’s policies increased from $3,000 to $7,200 this year, but moving the policy to Lloyd’s saved the homeowner roughly $4,000 on the premium bill.
“I’ve done several in shore communities,” Sutherland said. “I’m trying to heat it off before [homeowners] panic.”
Agents selling NFIP-backed policies are also working with several other changes to the program, including a new $10,000 deductible available for residential properties beginning this month and new minimum deductibles for Preferred Risk Policies and the Mortgage Portfolio Protection Program of $1,000 for both building and contents if the building coverage is less than or equal to $100,000.
If the building coverage is greater than $100,000, the new minimum deductible will be $1,250.
FEMA reiterated that it hopes to encourage private insurers to write more flood insurance, giving agents and their clients more options.
