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Flood Insurance Reform Act could mean higher premiums, but possibly not for two more years.

by Phillip Manning ~ October 28th, 2013

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In 2012, the Flood Insurance Reform Act was passed in order to cut the costs of running the National Flood Insurance Program.  It increases premiums and removes subsidies for residents under certain circumstances, including those who have multiple flood claims. There’s one very clear reason why Congress felt they had to act.

“The National Flood Insurance Program is literally billions of dollars in the hole…”

That’s Alaska Senator Mark Begich. He chairs the Senate subcommittee that oversees FEMA, and says that while the flood insurance program needs to be more solvent, there is a balance to be struck.

“We have to figure out how to financially get it sound, [while] at the same time making sure that residents, individual homeowners and businesses, aren’t burdened with a huge premium.  Our challenge now is, as FEMA is working through this, it’s come clearly to our attention that the premiums in some areas, Alaska obviously could be one of them, but across the country, are starting to see that these insurance rates could be pretty extensive.”

Senator Begich says that while the law was passed by the legislature, it was up to FEMA to come up with the actual rate structure.  The changes in that structure are sending ripples around the country.

One Alaskan homeowner who is being affected is Marne Gunderson, a resident of Talkeetna.  She says that she looked up what her new premiums could be after being told by the Mat-Su Borough that they were withholding a building permit until the property was raised to the revised flood level.  She says what she found on the National Flood Insurance Program website was shocking.

“If you’re below the base flood elevation, you’re looking at premium hikes of a hundred percent, maybe a thousand percent, from, say, the tune of about $1,000 a year to $10,000 a year.”

Marne Gunderson says that she believes a substantial portion of her neighborhood now lies below the official flood plane, which was amended within the past few years.  She’s worried not only about higher premiums and mortgage payments, but what a major increase in flood insurance costs could mean for market property values.  She says that would hit residents who do not have flood insurance because they are not paying a mortgage.  Selling that property with the knowledge that the buyer could pay thousands of extra dollars a year could be quite difficult.

“I understand the dangers of living in a flood zone, and perhaps that’s not wise, but it’s not incredibly helpful to put people in a situation where they have to vacate their homes.  There’s perhaps a better solution that could be more gradual.”

Senator Begich says he agrees, and that he and other Senators want FEMA to conduct an affordability study.   While FEMA is crunching numbers, Senator Begich believes that the rate increases should held back.

“There’s debate, even though we’re in a closed period here for a couple of days,  that’s trying to get a two year delay on the law that passed, which was to reform it, so we can get this affordability study.  From there, we may then have to make changes to the law we actually passed.”

In a time where Congress is embroiled in a number of partisan disputes, Senator Begich believes that the proposal to delay flood insurance reform should still get traction in both parties.

“This is one of those items where there’s some really good bipartisan support, because floods don’t determine if you’re Republican or Democrat, they just determine if you’re in the lowlands.”

Senator Begich plans to hold a meeting of the Senate subcommittee that oversees FEMA in November to hammer out the details, and he hopes that they can reach a proposal that will gain unanimous consent.

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