Flood insurance rates may increase; Residents could see premiums increase in the coming months


Thousands of Connecticut residents are likely to see flood insurance premiums increase in the coming months as the Federal Emergency Management Agency sets up a new tariff calculation system.

FEMA estimates show that 63 percent – just over 22,000 – of National Flood Insurance Program policyholders in Connecticut will see monthly increases in their premiums. The most common increase should be up to $ 10 per month, as forecast FEMA The data.

The new system, called Risk Rating 2.0, kicked off on Friday. It will first be introduced for new policyholders, and existing customers are expected to see new rates in April. The ceilings in federal law are increasing by 18% per year.

The National Flood Insurance Program typically covers up to $ 250,000 for the structure of a residential property and $ 100,000 for the content.

The 2.0 risk rating aims to make charges fairer and assesses more factors in determining a property’s risk of flooding than the old system. The system uses factors such as historical flood records, type of flooding, distance to water source, cost of reconstruction, and other property characteristics such as elevation.

Almost 35,000 Connecticut policyholders will be affected by the change and 37% will see decreases. Just over 80 will have increases of over $ 100 per month, according to FEMA The data.

“It’s a major change, it almost goes towards what I’m going to call what a normal insurance company would do,” said Diane ifkovic, Connecticut coordinator of the state’s national flood insurance program. She added that it had been over 50 years since the algorithm had been changed.

Experts also said the change is a step to help the flood program get rid of billions in debt, partially accumulated after years of underestimating the cost of flood damage that has only been exacerbated. by climate change.

“Thanks to the risk rating 2.0 FEMA is able to offer rates that are actuarial, fair, easier to understand and better reflect the risk of flooding a property ”, a FEMA spokesperson wrote in response to questions from Hearst Connecticut Media. “Currently, policyholders with lower value homes pay more than they should and policyholders with higher value homes pay less than they should. The 2.0 risk rating corrects this injustice. “

But several members of Congress – the two Democrats and Republicans – called for implementation to be delayed, citing concerns over lack of training and lack of affordability. At the end of September, 38 representatives and nine senators signed letters requesting the postponement. None of Connecticut delegation signed either letter.

Connecticut Senator Richard blumenthal said in a statement that he supported a delay in the full implementation of the program so that Congress can “carefully examine the real impacts of the new program”. Blumenthal added that the intention of the program was to improve the fairness of payments in the face of climate change.

“At a time when many residents are struggling to recover from the financial difficulties suffered during the COVID-19 pandemic and given the high number of homeowners who will see their rates increase, FEMA should delay full implementation of the program until Congress can thoroughly assess the agency’s plans, ”part of Blumenthal’s statement read.

Senator Chris Murphy’s bureau did not respond to requests for comment. The representatives either. Joe courtney Where that of Rosa DeLauro desks. representing Jim Hime’s spokesperson declined to comment, citing a busy schedule.

The senators’ letter also mentioned concerns that up to 900,000 homeowners will drop out of the program over the next 10 years because of the higher rates.

Ifkovic said she was also concerned that Connecticut homeowners who have paid off their mortgage and are not required by lenders to have flood insurance will forgo the option altogether, given the increase.

“You could say, ‘Well, I really need it’ or you could say, ‘Well, I’m going to take a chance,'” Ifkovic said.

Ifovic added that when people have doubts, she encourages them to take out flood insurance to cover risks.

“We are committed to closing the insurance gap and reducing the suffering caused by disasters by increasing the number of disaster survivors who are insured,” the FEMA said the spokesperson. “Insured survivors are more resilient and recover much faster after a disaster.”

Ifkovic said she suspects parts of the interior may see the most declines. Many of the reductions can be based on the cost of rebuilding a home, experts said.

“If your house is only worth $ 100 big or your house is worth $ 500 big, that’s also factored in now, “Ifkovic said.” So that’s the part of the equity, if you have a lower income versus a higher income, about the property then that is. is also a part of that. “

FEMA estimates show that some postal codes in Fairfield, Stratford and Old Saybrook will have some of the largest policyholders with the largest monthly rate cuts.

Some areas of Westport, Willimantic and Hartford are expected to experience the largest increases, according to FEMA projections.

The old system for decades underestimated the cost of flood risk, experts said.

Research of new Yorknon-profit First Street Foundation predicted that for residential properties with up to four units, the expected average annual loss per property was $ 4,063 in 2021; the association predicted that the average loss would increase to $ 5,226 for the same properties in 2051.

The areas with the highest growth in economic losses from flooding were to be Milford, Stratford and Norwalk, according to the report.

“We found on average 4.5 times more economic risk than what FEMA is the price for, ”said Jeremy Porter, head of research and development at First Street.

The 2.0 risk rating addresses some of those concerns, but the floodplain maps – which most mortgage lenders use to determine whether a buyer should purchase flood insurance – still don’t show the total risk, Porter said. .

In recent years, Connecticut has seen more flooding from small tributaries, streams and street flooding caused by submerged drainage systems. The Tropical Ida Depression, which caused widespread flooding in the state in early September, is a prime example of this type of flooding, Ifkovic said.

“We had a lot of flooding in areas that weren’t mapped floodplains,” she said. “It’s basically urban drainage, poor drainage, overflowing storm sewers, that sort of thing.”

And due to climate change, flooding is happening more often, experts said.

“They [FEMA] are basically fixing a program that is broken due to the realities of climate change, ”said Nick Vin Zandt, senior research analyst and insurance expert at QuoteWizard. “We see 100-year flooding every five or ten years.”

Over time, people may start to see larger increases, making it more difficult to afford to live in areas prone to flooding, Zandt wine noted.

“It’s kind of one of the big questions that we kind of have going forward, can you get to a place where people can’t afford flood insurance. ? ” he added.

But the increases will likely make the flood insurance program more tax-efficient, Zandt wine noted.

The program has been in debt for years, Porter said. Congress forgiven $ 16 billion of debt in 2017, but from 2020, around $ 20.5 billion still in debt, according to a publication by Congress Research Service .

While Ikovic said many details of how the factors will be weighted and calculated remain unclear, the 2.0 risk rating should present a more personal way of measuring flood risk for homeowners.

“Really before they map out what flood zone you are in and your ground elevation. Now it looks like they might be considering 10 things to try and capture each property’s individual risk,” he said. she declared.

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