Lake, Osceola and Seminole overpay for flood insurance

Study also shows that coastal counties pay too little

While the cost of flood insurance remains too low on Florida’s coasts, several inland counties are actually paying too much for it, according to a new study on flood risk assessment.

In Central Florida, Lake, Osceola and Seminole counties were all found to be paying premiums higher than their risk warrants.

“Florida is underpaying for insurance, but that is mostly driven by the coasts,” said Jeremy Porter, an analyst with the nonprofit First Street Foundation, which completed the study.

“In the center of Florida … there’s actually less risk than they’re currently pricing for properties.”

First Street determined risk by looking at the probability and magnitude of flooding. In addition to the study, First Street created floodfactor.com, an online tool homeowners can use to assess their individual flood risks.

Osceola County had the widest disparity in First Street’s research. The study found Osceola homes on average warranted a flood insurance premium of $202 but are paying $1,053 annually.

First Street estimates Seminole residents should be paying $443 per year, but instead they are paying $615. Lake’s median premium of $670 was found to be $24 more than what First Street suggests.

“Lake is within the margin of error,” Porter said, “so they’re paying roughly what they should be.”

Orange County was found to be underpaying based on its risk. First Street recommends an average premium in the county of $722, but the current median is $611.

Porter said the increased risk is often found in denser areas where heavy urbanization has meant more development.

“You do see developers have built in riskier and riskier places,” he said.

Flood insurance is determined by FEMA, using a map that places homes in or out of flood zones, or Special Flood Hazard Areas. Therefore, the premium isn’t based on property values or proximity to a water source.

“It’s based solely on are you inside or out of one of these zones?” Porter said.

“That’s a very one-size-fits-all approach to flood insurance,” said Del Schwalls, past chair at the Florida Floodplain Managers Association.

In First Street’s study, Florida was found to represent the largest growth in the country in terms of flood risk exposure. Over the next 30 years, First Street estimates Florida

might have $14 billion in properties at risk for flooding, with more than $2 billion occurring in properties currently not zoned for flood insurance.

“The bucket of money that’s used to pay flood insurance claims comes from all the premiums,” Schwalls said. “So those overpaying are balancing the bucket for those who aren’t paying enough.”

Through the National Flood Insurance Program, FEMA also discounts and subsidizes many premiums, such as for homes built before being mapped in a flood zone.

“[Subsidizing] adds to the problem of people paying more,” Schwalls said.

He said his organization has pushed FEMA for decades to make more individualized maps, something the government agency is said to be addressing in its Risk Rating 2.0 initiative, set to be released April 1.

The new system will account for individual factors, such as distance from the water source and elevation.

“It’s going to make it a much more graduated risk,” Schwalls said.

Once insurance companies have had a chance to comment, Risk Rating 2.0 will be offered for new flood policies on Oct. 1. Existing policies will be eligible for the update next April.

In an emailed statement, FEMA acknowledged First Street’s work but said it will not include the nonprofit’s findings in the Risk Rating 2.0 calculations.

“While entities are free to suggest or estimate their opinion of what flood insurance premiums should be, they are offering exactly that — an opinion — and they do not have insight into the Risk Rating 2.0 initiative,” said National Flood Insurance Program senior executive David Maurstad.