The Flood Insurance Saga

The Senate has passed a bill that will greatly impact many homeowners in flood-prone areas—like Southwest Florida.

The bill will delay premium hikes for years for hundreds of thousands of homeowners who’ve purchase their flood insurance from the federal government, according to the Naples Daily News.

There has been widespread concern about changes conducted two years ago to tighten up the program’s finances. And those concerns were reflected in the extensive 67-32 vote on Jan. 30. The changes, in many cases, are producing sudden, sky-high insurance rates that are unaffordable for many homeowners in flood-prone areas whose insurance has historically been subsidized by the government and other policyholders.

We Can’t Always Agree

Opponents of the bill say it untangles long-sought reforms of the flood insurance program, which has required countless taxpayer bailouts and owes $24 billion to the Treasury Department.

The bill would hinder huge premium increases for four years—increases that are supposed to phase in next year. It would also allow homeowners to pass policies that are below-cost on to people who buy their homes. And residents who have recently bought homes and face harsh, instantaneous jumps in their premiums would see those increases pulled back.

Opponents of the new legislation say it basically unravels reforms to the much-criticized flood insurance program that made taxpayers responsible for $24 billion in losses by subsidizing ownership in precarious areas.

How Does This Affect You, The Homeowner?

The changes were put in place to make the program more financially sound and put a stop to homeowners in less precarious areas basically subsidizing below-market insurance rates for homeowners in places more at risk for flooding.

The Federal Emergency Management Agency, supporters of the legislation say, is doing a poor job of producing new, accurate flood maps.

“The rates that would be imposed if the law doesn’t get changed will be impossible — not just impractical — impossible,” said Sen. Roger Wicker, R-Miss. “It’s being implemented with faulty data and we need to go back to the drawing board.”

Due to the higher insurance rates, homeowners must also face having to sell their properties at distressed prices.

Proponents of the Bill

Supporters of the bill claim it buys time for the government to conduct a study of the affordability of flood insurance and for lawmakers to come up with ways to help poorer people and the working class hang onto their homes.

The Big Picture

The program will help 5.6 million policyholders, 20 percent of whom receive subsidized coverage for older homes built before communities joined the flood insurance program. But unfortunately, 1.7 million owners of second homes who purchased their properties before the 2012 overhaul will find no relief in the Senate bill.

Critics say the premium hikes threaten the sustainability of older beachfront towns—like Naples, Bonita Springs and Estero.

The 2012 law also phases out below-market rates for owners of grandfathered properties. Those homeowners would likely see their flood risks re-estimated and would see higher rates phased in over five years, so they could face much larger premium jumps.