The Federal Emergency Management Agency (FEMA) has announced rate increases for the National Flood Insurance Program (NFIP) for the coming year. On April 1st, the average premium jumped 8% and will go from $866 to $935.
Add on some surcharges and the total average bill for renewals and new accounts will be $1,062. It still — FEMA says — won’t be enough to keep the NFIP from being flooded with debt.
The surcharges are not part of the premium and are not subject to the cap limits. In some cases the premium jump could top 18%.
A report by the Congressional Budget Office (CBO) called the National Flood Insurance Program Financial Soundness and Affordability said the hikes aren’t going to keep the NFIP from going deeper into debt. Part of the reason is because of subsidies for dwellings and businesses along the nation’s coasts.
They account for 3/4 of the NFIP’s policies.
The Associated Press (AP) said fewer of those living on coasts are buying flood insurance now than in the past five-years. The price hikes are causing the drop. It’s not something the NFIP wants to see. Doubling the number of people with flood insurance would be its wishes.
Banks — says the AP — are also not insisting as many properties have insurance as they have in the past.
The changes causing the flood insurance hikes are part of the Biggert Waters Flood Reform Act of 2012 and that were reaffirmed in the Homeowner Flood Insurance Affordability Act of 2014. This is what they include:
• Premium rates for four categories of Pre-FIRM subsidized policies — non-primary residential properties, business properties, Severe Repetitive Loss (SRL) properties (which includes cumulatively damaged properties), and substantially damaged/substantially improved properties — must be increased 25 percent annually until they reach full-risk rates
• The average annual premium rate increases for all other risk classes are limited to 15 percent while the individual premium rate increase for any individual policy is simultaneously limited to 18 percent
• The average annual premium rate increase for all other Pre-FIRM subsidized policies not covered by the 25 percent category above must be at least 5 percent
• There are some limited exceptions to the 18 percent cap on premium rate increases for individual policyholders. These include policies on the properties that are subject to 25 percent annual premium rate increases
Source links: Insurance Journal, Carrier Management, APP.com