Flood insurance rates are on the rise in Virginia
By Michael Felberbaum and Brock Vergakis
More than 20,000 Virginia homeowners and businesses could see their annual rates for flood insurance increase up to 25 percent as part of an attempt to put the troubled National Flood Insurance Program back on sound financial footing, according to an analysis of federal data by The Associated Press.
For many years, the federal government has offered subsidized flood insurance on homes and businesses constructed in the days before there were many rules about building close to the water. But the subsidies have been costly. Premiums collected haven’t been sufficient to cover the payouts, leaving the federal program billions of dollars in debt.
In 2012, Congress passed a law requiring approximately 1.1 million policyholders to start paying rates based on the true risk of flooding at their properties. However,as public outcry over the increases began to swell, Congress earlier this month passed legislation that eases the timeline for the insurance overhaul. The measure was signed into law Friday by President Barack Obama.
Instead of facing onerous increases immediately, affected homeowners now will face annual premium increases as high as 18 percent year after year, until the government is collecting what it needs to pay out claims. Owners of businesses and second homes face increases of 25 percent each year.
In Virginia, about 18 percent of the state’s 114,880 policies will see premiums go up. Nearly 6,000 policy owners face a 25 percent increase each year, including 2,086 businesses and 3,470 vacation homes or nonprimary residences including second homes.
Meanwhile, 14,382 policy owners face up to an 18 percent increase each year. At year’s end, Virginia’s flood insurance policies represented $28.2 billion in coverage and $83.7 million in premiums paid by insured property owners – about $730 annually per policy.
Chesapeake homeowner Kelly McKenna’s house was built in 1964 and sits near a tidal canal that occasionally floods her backyard, shed and crawl space during high tide and hurricanes. She was going to see her annual premiums increase to more than $5,000 a year from about $2,600 a year under the 2012 law when she got her renewal notice in October.
While finding water on her property is common, she said she’s only had one flood insurance claim in the six years that she’s lived in the house, during a 2009 nor’easter. She was already working to mitigate the flood risk when she learned her premiums would effectively be doubling.
“$2,600 a year – that’s a big chunk of my mortgage payment,” she said.
After about $3,200 of work that included raising equipment and installing new air vents in her crawl space, her premium was cut down to $733 a year.
“It turned out to be very fortuitous that I was proactive with this,” she said.
It isn’t clear yet how the Federal Emergency Management Agency, which oversees the program, will choose to implement the rate increases.
The law requires the elevation of homes in a flood plain to be measured to determine risk. The cost for insurance based on that risk could cause premiums to jump by hundreds or even thousands of dollars a year for property owners in both coastal and in-land areas.
“It’s definitely a concern for a homeowner that’s on a fixed income,” said Charley Banks, the coordinator for the National Floodplain Insurance Program in Virginia and a flood plain management program engineer for the state Department of Conservation and Recreation. “I’m quite sympathetic to their plight. They’re kind of between the proverbial rock and a hard place.”
In South Hampton Roads, the city with the largest number of homeowners and businesses facing rate increases is Norfolk, which has plenty of older homes near water that were built before flood maps were drawn and have been receiving subsidized rates.
In Norfolk, 2,235 of the 12,284 flood insurance policies in place at the end of 2012 had discounts that will be phased out. That worked out to 18 percent of all policies in place.
The numbers of discounted policies were much smaller in other local cities: 1,027 in Virginia Beach, 683 in Chesapeake, 550 in Portsmouth and 32 in Suffolk.
Virginia Beach has the most policies in force of any municipality in the state: more than 25,000. But only 4 percent of them are expected to see rates increase because insurance subsidies were provided only to houses built before 1975. A large percentage of homes in the city have been built since that time.
Scott Hunter, owner of the Virginia Beach-based company Comparity, said he’s received numerous calls from real estate agents, mortgage brokers and homeowners in Hampton Roads like McKenna looking for ways to reduce a home’s flood insurance costs as a result of the policy changes. His company provides multiple insurance quotes at once and recommends solutions for reducing premiums, such as elevating structures or providing additional crawl space vents, among other things.
He said the new insurance rules and rates are jeopardizing numerous real estate transactions and, in some cases, making it difficult for people to afford the homes they have.
“It’s pretty much any coastal market in Virginia,” he said “It’s all over the map, and it just depends where they are.”
Pilot writer Dave Mayfield contributed to this report.