Kathleen Pender:
Harvey is not expected to boost most premiums for National Flood Insurance Program.
Hurricane Harvey is not expected to raise National Flood Insurance Program premiums, with one possible exception.
People who file a flood-insurance claim that puts them into a “severe and repetitive loss” category could see their premiums go up 25 percent per year. This happens when a home has either four separate claim payments of more than $5,000 each, or two claim payments that exceed the home’s current value. In either case, two of the claim payments must have occurred within 10 years of each other, according to the Federal Emergency Management Agency, which runs the program.
The problem is, the claims history applies to the home — not to the homeowner — going back to 1978 or to the construction date if it is later than 1978.
If homeowners don’t know that claims were filed before they purchased the home and file one that throws the property into the high-risk category, their premiums could soar.
FEMA does not make it easy to find a
home’s claims history. There is no public database, and for privacy reasons, the program will disclose it only to the home’s current owner — not to prospective home buyers — and only in writing after a written request, said Kevin St. Pé, an insurance agent in south Louisiana.
Consumer groups have been urging Congress to create a database (with personal information redacted) in which homeowners and buyers could look up the claims history of individual properties. However, California and most states require sellers to disclose any known flooding on the property, FEMA flood insurance specialist Edith Lohmann said. Local officials can also provide information related to neighborhood flooding events and frequency, she added.
Robert Hunter, insurance director with the Consumer Federation of America, also wants Congress to disclose to current and prospective homeowners the difference between the home’s current premium and a rate that reflects the full risk of the property. Many homeowners are paying less than the full-risk rate thanks to grandfathering (which protects some policyholders from rate increases when flood maps change) and various discounts.
By law, the premium on a homeowner’s primary residence generally can’t go up more than 18 percent a year (except for people in the severe-and-repetitive category). This year, the average premium, including mandatory fees and surcharges, went up 5.4 percent to $1,005.
Harvey will put another hit on the beleaguered program, which is deeply underwater and not likely to repay the billions of dollars it borrowed from the U.S. Treasury after Hurricanes Katrina and Sandy. But it won’t raise premiums across the board.
“A single event, like Hurricane Harvey, does not precipitate insurance premium changes nationwide,” a FEMA spokesman said in an email. Flood insurance rates are based on factors specific to the property, such as the age of the building, flood zone, amount of coverage, and occupancy and foundation type. “These bases of rating are applied across the country, not uniquely to a state or region,” he added.
When people enter the severe-and-repetitive category, their premium can go up by 25 percent a year until it hits their full-risk rate.
Lisa Sharrard, an insurance agent and owner of U.S. Flood Solutions in Columbia, S.C., has a client whose annual premium jumped to $5,144 from $2,836 after he got thrown into the severe and repetitive category. He made two claims on the policy, not knowing that the home had two claims before he purchased it dating back to Hurricane Hugo in 1989, she said.
FEMA’s Lohmann could not say why this policyholder’s premium went up by more than 25 percent without knowing the specifics of the case, but she said there are many factors that affect premiums.
FEMA makes grants available to policyholders in the severe-and-repetitive category to help pay for flood-mitigation projects, such as elevating the home. However, homeowners cannot apply for these grants themselves, they can only come through state or local governments, and many local governments say they don’t have the resources to apply for them from FEMA, Sharrard said.
Policyholders can contact the flood program at (866) 395-7496 to get information on their home’s flood-loss history.