Florida welcomes proposed delay in flood
insurance rate hike
|
Article Courtesy of The Sun Sentinel
By
William E. Gibson
Published
November 4, 2013
WASHINGTON – To the great relief of property owners
and home buyers in low-lying parts of Florida, Congress is moving
quickly to delay a huge hike in flood-insurance rates, sparing many from
paying hundreds or even thousands of dollars a year.
Across Florida, owners and insurance agents welcomed a reprieve from
higher rates that they fear would cripple the state's housing recovery
and devastate property values in coastal communities and along inland
lakes, canals and riverbanks.
It's not a done deal. But a bill filed in the U.S. Senate on Tuesday and
backed by members of both parties in the U.S. House showed a strong will
in Congress to halt the higher rates for four years and assess their
impact.
"I think it's fantastic," said Jonathan D. Rausch, an insurance agent in
Pembroke Pines. "This way, a homeowner who was paying $300 a year and
facing more like $1,000 a year now will see it go down to the original
$300 renewal. All the customers love it. Everyone is super happy."
Rausch was able to tell a condo group in Hollywood that if the new rates
are delayed the owners could renew their lapsed policy for $5,126 – not
$36,584, which is what they faced under the new rates approved by
Congress last year.
"They (members of Congress) are starting to realize that people cannot
possibly afford to choke down some of these rates," said John Wilson, an
agent in Winter Park for the Insurance Group of Central Florida. "Some
of them are just incredible increases. Something certainly needs to be
done."
Pressure from places like Florida, home to 37 percent of the nation's
flood-insurance policies, prompted members of Congress to try to undo or
delay legislation passed last year with strong bipartisan support to
phase in actuarially-sound rates.
Most policy holders face relatively small increases in premiums. But
unless the new rates are delayed, tens of thousands of Florida owners in
the riskiest places would pay increases of 25 percent a year starting
this year until they reach the full-risk rate. In some of the most
extreme cases, insurance would cost as much as 10 percent of the
property's value, according to federal officials.
Business properties, second homes, property repeatedly damaged by floods
and homes sold after the new law was signed in July 2012 face the full
actuarial rate -- prompting Gov. Rick Scott to warn that the shock would
devastate Florida real estate.
The new law had sailed through Congress last year – one of its few
accomplishments -- to make the National Flood Insurance Program solvent
after running up a $24-billion deficit.
The program was created in 1968 after a costly batch of floods prompted
Congress to provide cheap insurance at subsidized rates rather than send
disaster aid. But after a decade of hurricanes and big deficits,
lawmakers last year decided to phase in rates that reflected the full
risk of flooding.
New flood maps, meanwhile, put many homeowners in Central Florida in
flood zones for the first time. New proposed maps in Broward County, on
the other hand, put many residents outside the riskiest flood zones. The
designation is crucial because lenders require insurance for property in
the riskiest areas.
"My house is by a road, another set of homes and then a small retention
pond. The retention pond is two-feet deep. My dog goes into that
retention pond and his stomach doesn't get wet," said Mike Kirby, 56, of
Longwood. "But I've been forced to get flood insurance!"
Kirby, who pays $900 a year, was grateful for word that the increased
rates may be delayed. "They need to think everything out and look at all
the consequences of something before they throw it out there," he said.
The bipartisan legislation would delay the rate hike while the Federal
Emergency Management Agency takes a close look at the impact.
Proponents say the law is needed and should not be delayed because it
spares taxpayers from subsidizing insurance and discourages development
in vulnerable places. But many in Florida say they should not face a
sudden rate hike for existing property after playing by the rules.
"The thinking is that if people can afford the house, they can afford
the insurance. But that's not necessarily true," Wilson said. "It may
very well be that it shouldn't be a problem for somebody in Orange
County that somebody else decided to buy a house on the beach. But the
problem is, how do you rein that back in? We did allow it. We did have a
program in place. So now we have homes there, and people did manage to
buy the homes. But they can't afford to pay $12,000 or $13,000 a year
for flood insurance."
Many homeowners and buyers are just catching up to the new rates -- and
of attempts to delay them.
"I'm holding my breath," said Douglas Rill, who is awaiting his
insurance bill for a home along the Intracoastal Waterway in the Town of
Palm Beach. "I don't have the number yet, but I'm a little freaked out
about what it could actually be. It's not real popular to help wealthy
people along the water."
Rill, a real-estate broker, is also concerned about the impact on sales.
"It's surprising that after surviving the downturn in the market, there
would be another factor of uncertainty that would shake people's
confidence and make buying a home more difficult or more expensive," he
said. "It's exactly what we don't need."
|