Flood insurance rate changes are the focus of MV Insurance seminar

This is a Vineyard Haven detail from one of the current FEMA federal insurance rate maps (FIRM) showing flood zone information. These maps will soon be replaced by newer, more detailed maps. — FEMA

A healthy crowd of about 100, many of them in the real estate business on Martha’s Vineyard, turned out for an informal seminar on flood insurance and mapping changes, sponsored by Martha’s Vineyard Insurance Company Wednesday morning at the Harbor View Hotel in Edgartown. What they learned is that property owners in newly redrawn flood insurance zones can expect significant increases in insurance premiums.

The guest speaker was Jana Critchfield, regional sales director for Wright Flood Insurance, the largest provider of federal flood insurance (NFIP) policies in the United States and for 25 years a regional flood insurance specialist at the Federal Emergency Management Agency (FEMA).

She was joined by Doug Hoehn of Vineyard Haven, a surveyor with the Island firm of Schofield, Barbini and Hoehn.

“I can’t remember a time when there has been more uncertainty in the marketplace about where you’re going to get insurance,” MV Insurance chairman Sandy Ray said in his opening remarks. “What kind of insurance you’re going to have, what risks insurance companies are willing to take, and what they are going to charge you for it.”

Ms. Critchfield gave a brief but detailed presentation and answered questions defining some of the little understood parts of the changing world of flood insurance. She said changes in federal law as a result of the enormous losses inflicted by the hurricanes Katrina in 2005 and Sandy last year, are forcing changes in federally backed flood insurance rules.

Congress, with the passage of the Biggert-Waters Flood Insurance Reform Act of 2012, ordered an end to many premium subsidies for property owners that were established with passage of the 1968 National Flood Insurance Program (NFIP). Only about 20 percent of NFIP policies receive subsidies she said.

The new law eliminates some artificially low rates and discounts set by the earlier law and will, after a series of annual rate increases of 20 to 25 percent, reflect full-risk insurance rates. Most houses and businesses in flood-prone areas will see higher flood insurance rates, she said.

New flood zone mapping changes locating more houses in higher risk flood zones and mandatory elevation certificates requiring the services of trained surveyors are requirements of the new legislation.

“Owners of non-primary/secondary residences in special flood hazard areas (SFHA) can expect to see a 25 percent increase annually until their rates reflect true risk,” Ms Critchfield said.

On October 1, owners of property that has experienced severe or repeated flooding and business properties in a SFHA will see a 25 percent rate increase annually until rates reflect true risk. Grandfathered policies that once allowed new homeowners to keep the existing policy are no longer allowed. She said that there will be no difference in rates for flood insurance for primary and secondary homes under the new law.

Owners of primary residences in SFHAs will keep their subsidized rates until the property is sold or the policy is allowed to lapse or a new policy is purchased.

The bill also mandated remapping of communities to update flood zones, along with other changes that are resulting in many homeowners facing big premium hikes and more property owners being told they must buy flood coverage.

The remapping process is a nationwide FEMA effort using the latest mapping and hydrologic technology. Preliminary maps were delivered to local governments last spring. The maps will not become official until they are approved by local communities not less than a year after they were delivered, this coming spring at the earliest.

The new maps, available on the FEMA website, show the results of changing weather patterns, including more and larger high water zones in most coastal areas, according to Mr. Hoehn. He said about 80 percent of the Island waterfront areas he has looked at on the new maps show a one- to two-foot high water mark increase. The remaining areas either show no change or in a few cases are removed from the high water zones. He said he was surprised to see that some areas around Hart Haven had been removed from the higher water zones.

Mr. Hoehn talked about the process of filling out an elevation certificate, proof of a building’s relative location, which must be completed by a qualified surveyor before flood insurance can be purchased, according to the new law. He said the cost of the work to get a certificate could run anywhere from about $500 to $3,000. Certificates are required for each insured building on a property and can be transferable and stay with the property when it is sold if there have been no significant changes to the land or the building. Any change in a building of more than 50 percent requires a new elevation certificate.

Ms. Critchfield suggested consulting an insurance agent about any questions a homeowner or realtor might have. She also suggested that in some cases renewing policies before they expire may allow the policyholder to qualify for the lower rates of the current year.

Getting an elevation certificate to determine the correct rate and considering a higher deductible may help reduce insurance costs. Rebuilding on higher ground or remodeling using designs that can reduce the risk of loss from flooding may also be cost savers.

A story in Tuesday’s Washington Post, online version, reported a bipartisan group of lawmakers announced legislation that would delay for about four years several changes to the flood insurance program that are threatening thousands of people with unaffordable premium hikes. No date is set for a vote on the changes. Ms. Critchfield was unavailable for comment on this story.