Flood insurance costs up in areas once deemed low risk
WASHINGTON — In the past year, the southwestern Louisiana city of Lake Charles weathered two hurricanes, intense rainfall that sent water gushing down streets and a deep freeze that burst pipes.
Yet Tommy Eastman may eventually drop coverage on his four-bedroom home — which has so far escaped damage — because the cost of his flood insurance is going up.
“Once it starts getting over $1,000, I’m gonna start thinking, ‘Well, what am I doing?’ ” said Eastman, a real estate agent whose annual policy is scheduled to climb from $600 to $2,500 over the next several years.
Under a revamped federal flood insurance program rolled out this fall, millions of homeowners are set for rate hikes that officials say more accurately reflect a property’s risk. That includes the vast majority of the 1.7 million homeowners with relatively cheap policies in areas federal officials previously deemed low or moderate risk — and where coverage is voluntary.
The overhaul is intended in part to make it more expensive to develop in risky areas. But some worry the price hikes will only make it harder to convince homeowners to voluntarily buy or keep flood coverage, particularly in middle- and working-class areas.
The Federal Emergency Management Agency says its new insurance program factors in the characteristics of individual properties, such as how close they are to water, how expensive they are to rebuild and whether they faces multiple types of flood risk. In many parts of the country, such risks are growing as climate change increases
the strength of hurricanes and the intensity of rainstorms.
The program — Risk Rating 2.0 — will mean higher prices for about three-quarters of the 4.9 million federal flood insurance policies, and decreases for the rest. Voluntary policyholders in single-family homes will be hit particularly hard, with an estimated 90% set for hikes, according to FEMA. The agency said it plans to collect 50% more in premiums under the new program over time.
“We’ve learned that the old way of looking at risk had lots of gaps, which understated a property’s flood risk and communicated a false sense of security,” said David Maurstad, a senior executive of the National Flood Insurance Program.
In spite of identifying more flood risk across the country, the new system doesn’t change who is required to buy coverage. In areas FEMA deems highest risk — known as the 100-year flood zone — flood insurance is required on government-backed mortgages and many banks also require it for mortgages in high-risk areas. FEMA has said the flood maps aren’t meant to predict where flooding may occur, but say where coverage is required
and help communities make building decisions.
In recent years, homeowners living in places where coverage isn’t required have faced losses in the billions of dollars. Between 2017 and 2019, nearly 40% of the flood claims FEMA received were for properties that fell outside zones where insurance is required, an agency representative told Congress last year.
Many properties outside the flood zones face risk “that has always been there but has never been identified,” said Matthew Eby, executive director of First Street Foundation, a research firm that produces detailed maps of flooding risks.
First Street estimates that 14.6 million properties across the U.S. are at substantial risk of flooding, far more than the number of flood policies federal government insures. A Government Accountability Office report this year recommended that the federal government update the rules on who is required to get coverage to protect more high-risk homes from flood disasters. A separate GAO report found FEMA’s flood maps do not reflect the latest climate science or key flood hazards such as heavy rainfall.