Flood-zone remap may affect premiums

Colorado residents and business owners may see changes to flood-insurance premiums because of the remapping of flood zones in the wake of September’s disaster and National Flood Insurance Program legislative reforms.

“Anybody that was affected by the September flood is likely to be mapped in a flood Zone A,´ said Charee Voelz, personal lines director for Greeley-based insurance company Flood & Peterson.

“This directly impacts the market value of a house,” Voelz said. “Even if the owner could get regular flood coverage, I don’t see anybody in a Zone A paying less than $1,000 per year.”

And that’s not just for first-time flood insurance buyers.

A Zone A is identified on the Flood Insurance Rate Map as a Special Flood Hazard Area, defined as having a 1 percent chance of experiencing a flood event in any given year equal or exceeding a previous disaster. The 1 percent flood also is referred to as the “base flood” or “100-year flood.”

Moderate flood-hazard areas are labeled Zone B or Zone X, and minimal-hazard areas are known as Zone C or Zone X.

The National Flood Insurance Program run by the Federal Emergency Management Agency assesses property flood risk and determines insurance premiums. From Aug. 31 through Dec. 31, the number of policies increased by more than 1,000, bringing the total to 22,987 in Colorado. The average annual premium rate was $809.

Boulder, Weld and Larimer counties are expecting amended flood mapping to occur in the next few years.

“Larimer County is eagerly awaiting a flood model that is being prepared by the state,´ said Eric Tracy, a development services engineer with Larimer County. “This model will give us a rough idea of where the risks stand in the post-flood condition. These maps are not intended to be used to tell people if they can or cannot rebuild but rather to inform those who can rebuild as to what elevation they should build to in order to provide a higher level of protection to their home.”

Although the maps are intended to give residents beneficial information about home and business flood-prevention components, the reorganization of the maps could put people in higher-risk zone areas, which directly translates to higher premiums.

“If you live in a high-risk area, you are required to have flood insurance if you have a (home or business) loan,´ said Amy Bach, co-founder and executive director of United Policyholders, a nonprofit organization that advocates for individuals with insurance. “Those who aren’t in a high risk area often think that they don’t need it; they don’t want to spend that kind of money if it’s unnecessary. The problem is that if only high-risk people are buying insurance, it is prohibitively expensive.”

Remapping zones is not the only catalyst to more expensive flood insurance, however.

Since 2012, the NFIP has been in and out of Congress with changes to its policies and legislative reforms intended to alleviate some of the $25 million in debt the program has sustained.

“There have been a lot of changes to the flood program in the past two years,” Bach said. “There is a lot of political unrest.”

The changes began with initiation of the Biggert-Waters Reform Act of 2012. The act cut some of the subsidies that allowed for lower premiums. In some cases, premium costs tripled as a result.

“People in certain areas got it very hard,” Bach said. “Congress went too far and used an ax instead of a surgical knife. The subsidy reductions were only supposed to affect 20 percent in the NFIP.”

Advocates and insurance agents alike are seeing the effects of these reforms.

“Before the law changed, I quoted a gentleman a premium of $1,000 for his home,” Voelz said. “When I quoted him after law changed, I had to amend his premium because his house was determined to sit at a foot below flood elevation. His premium now is almost $5,000.”

Voelz said she has seen several cases with a similar outcome because of the amendments.

FEMA officials responded to questions about the debt crisis and Biggert-Waters with a statement:

“The National Flood Insurance Program’s actuarial rates reflect expected future losses and expenses of policy holders and are not loaded for past losses or debt.”

For many, however, that’s not good enough. As a result, the NFIP reforms are far from over.

On March 13, 2014, the Homeowner Flood Insurance Affordability Act (HR 3370) was passed by Congress and is awaiting President Obama’s signature. The legislation caps annual rate increases at 15 percent, among other directives.

According to the Coalition for Sustainable Flood Insurance, the rate cap decreases FEMA’s authority to raise premiums within a single property class beyond a 15 percent average per year, with an individual cap of 18 percent per year. Before Biggert-Waters, the class average cap was 10 percent. Currently, the class average cap is 20 percent.

The bill requires a 5 percent minimum annual increase on pre-FIRM primary residence policies that are not at full risk. The updated legislation also states that FEMA shall strive to minimize the number of policies with premium increases that exceed 1 percent of the total coverage of the policy. For example, if the total coverage is $250,000, 1 percent would equal $2,500.

Sens. Mark Udall and Michael Bennet, both D-Colo., voted in favor of HR 3370.

“The flood insurance program is far from perfect, but it’s still better than nothing in terms of a safety net,” Bach said. “The ball is still in play in Congress. People need to try and stay calm and evaluate options and know there are Colorado public officials going to bat for the flood-insurance reforms.”

on Facebook on LinkedIn