TALLAHASSEE, Fla. – Jan. 10, 2014 – A solution to some Florida homeowners’ flood insurance woes remains elusive, though proposed changes in both the Florida Legislature and U.S. Congress offer a ray of hope. Each moved forward this week, though passage isn’t certain.
Under the Biggert-Waters Act, flood insurance policies underwritten by the National Flood Insurance Program (NFIP) must become actuarially sound, meaning a premium that reflects the true cost of a property’s coverage. However, the premium increase on some subsidized properties is higher than most people anticipated when the bill was signed. In some cases, homeowners face NFIP price increases as high as 900 percent.
On Wednesday, state senators supported a measure that could make it easier for private insurers to sell flood insurance in Florida. The Senate Banking and Insurance Committee unanimously supported SB 542 by Sen. Jeff Brandes, R-St. Petersburg. However, a few members weren’t sure if SB 542 would work as planned to lower rates. To become law, SB 542 must be passed by the full Legislature and signed by Gov. Rick Scott.
“We’ve been encouraging private insurance to come to the state of Florida to take policies out of Citizens (Property Insurance), and they’re not doing it,” says Sen. Nancy Detert, R-Venice. “Plus even if they did, and they want to be actuarially sound, it doesn’t reduce the cost for consumers.”
“The most responsible way to reduce premiums is to increase supply,” counters Sen. Garrett Richter, R-Naples. “We increase supply by inviting the private market to come in and provide product. This is a good step that the Senate in Florida is taking without waiting for Washington to solve a huge problem that is coming to the marketplace.”
Under SB 542, Florida flood policyholders would be allowed to choose their level of flood insurance coverage – enough to cover the outstanding balance of their mortgage, replacement cost for the property or actual cash value of the property.
Florida Realtors supports the bill. John Sebree, senior vice president of public policy, says it offers a “glimmer of hope” following a slow federal response.
Flood insurance reform has bipartisan support in Congress, though not everyone backs changes.
On Tuesday, a coalition of Republicans and Democrats called the premium increases “unconscionable” and again proposed legislation to delay premium policy changes mandated in Biggert-Waters for four years, giving lawmakers time to study the affordability of rates and accuracy of flood maps.
But Congress had lots of support to delay increases last year, yet failed to do so before its holiday recess. However, a key sponsor, Sen. Mary Landrieu of La., says she believes the bill now has enough backing to pass. “Next week is more realistic,’’ she says. “This coalition is growing stronger every day.’’
The bill – the Homeowner Flood Insurance Affordability Act – would still need to be passed by the House, even if the Senate brings it up for a successful vote. After that, it would need President Obama’s signature to become law. There is already a similar bill in the House, but a vote isn’t imminent in that chamber.
A coalition of lobbyists in Washington opposes any four-year extension, which may have slowed some Congressional action. Overall, groups such as Washington-based Smarter Safer – a handful of insurance and environmental groups – point to the reason rates went up in the first place: The NFIP operates in the red, and it will owe billions more if increases are delayed.
Instead, the group recommends a case-by-case solution: Homeowners who cannot afford higher flood insurance premiums could be subsidized, but only if they apply and receive approval for a subsidized rate, according to R.J. Lehmann, a senior fellow at R Street Institute, a think tank based in Washington, D.C.
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