Thanks to the 2012 Biggert-Waters flood insurance reform law, premiums on flood insurance are set to go through the roof as Congress attempts to rescue the National Flood Insurance Program from its staggering $24 billion in debt.
This means that not only will existing customers experience rate hikes, 1.1 million new residents in New England and Louisiana will have to pay higher, full-market rates as congressional subsidies expire in 2014.
Caught in the midst of the melee, insurance producers have been acting as counselors to clients struggling to come to grips with the new requirements. Of course, this isn’t always easy with just one flood insurance provider and an iron-clad map of high-risk flood zones.
“The map is the map. You don’t have a lot of control over it,” said Geoff Gordon, president of Andrew G. Gordon, Inc. insurance agency in Norwell, Mass.
In New York and New Jersey, businesses and homeowners are facing rates that could reach $20,000 if they don’t elevate their homes to meet new guidelines. And because flood insurance is required from homeowners with a federal mortgage, they are left without a choice.
For some cash-strapped homeowners, that’s asking too much. Instead, they choose to sell or even abandon their property and quite literally head to higher ground.
In such a tight spot, Gordon attempts to help clients save money by advising them to get their homes up to code and obtain an elevation certificate.
“Elevation certificates are going to be valuable for anyone who wants to put things back in their own control,” said Gordon, whose agency borders several towns affected by NFIP’s rate hikes. “Getting homes elevated runs between $600 and $800, but if you can save yourself money on flood insurance now, you’ve saved yourself a lot more than that two years down the road. Flood insurance can get really expensive and rates keep going up.”
Savvy producers may even look ahead to increased rate hikes by following updates in the Federal Emergency Management Agency (FEMA)’s mapping of high-risk flood zones. By warning clients of possible changes in flood zones, producers give clients time to “lock in” lower flood insurance rates before rate hikes are announced.
While congressional delegations from affected states are fighting for a delay in the new rates’ implementation, Gordon said producers shouldn’t worry too much about a loss of business.
“Savings will come from other, more discretionary types of expenses,” he said. “At least that’s my experience. We’ll see.”
