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While millions of indebted Florida homeowners are already trying to keep their heads above water, recently enacted flood insurance regulations are threatening to swamp the housing market with even more problems.
With the end of subsidized flood coverage, Florida legislators have been looking for ways to keep their constituents from drowning in sky-high premiums. One such solution is a bill co-sponsored by Rep. Gus Bilirakis, R-Palm Harbor, who recently discussed the measure with Bay News 9 anchor Al Ruechel.
After listening to Bilirakis explain his bill, Ruechel asked the congressman what it might cost to cover a home worth $100,000. Bilirakis’ answer was eye-popping, according to a reader who brought it to our attention: "Well, we’re saying maybe, I’m approximating, but maybe $200 to $300 annually. Approximate. Because I’ve done these figures in the past."
The reader told us he couldn’t believe his ears, and frankly, neither could we. Would a $100,000 home really only cost as little as $200 a year to cover under the Bilirakis bill? We dove into this claim with both feet.
A deluge of problems
First and foremost, the 12th District representative’s figure sounded so low that it led us to wonder if Bilirakis had simply misspoken. We asked his office if that was the case. They assured us he had, meaning to say "monthly" instead of "annually." So if you were watching and thought your flood insurance bill could end up being only a few hundred dollars a year, sorry to disappoint you, but his office did correct the statement.
But let’s go through the math, anyway.
Bilirakis was referring to his proposed H.R. 3312, the Homeowners Flood Insurance Relief Act of 2013, which was introduced in the U.S. House of Representatives on Oct. 23. The bipartisan bill is co-sponsored in part by Florida’s Thomas Rooney and Ileana Ros-Lehtinen, both Republicans, and Democrat Kathy Castor.
It’s a response to the Biggert Waters Flood Insurance Reform Act of 2012, which Bilirakis supported. The law took effect on Oct. 1, 2013, and Bilirakis and other lawmakers have since been focusing on how to handle the law’s consequences. (Lawmakers said they didn’t realize such dramatic rate increases would happen.) Biggert-Waters ended subsidized premiums for the troubled National Flood Insurance Program, which is some $24 billion in debt, leading to astronomical increases for some homeowners.
Homes with severe or repetitive losses, along with second homes and businesses, face rates that are allowed to rise 25 percent per year until they mirror their true risk of flooding. That applies to some 50,000 policyholders in Florida. Other homeowners in flood-prone areas will be grandfathered in at current rates unless they sell their homes or let their policies lapse.
About 115,000 subsidized condos or multifamily homes won’t be affected, nor will about 1.8 million Florida policies currently not being subsidized.
Some horror stories about changes in premiums involve homes being hit with insurance bills quintupling or worse, climbing well into five figures for a year of coverage. Many neighborhoods in flood-prone areas are already reporting dismal sales figures, with sellers frightened off by sky-high insurance quotes. The problem is especially troublesome for Florida, which Gov. Rick Scott claimed has paid out four times what it has received in flood claims over the last 35 years. We found that Mostly True.
H.R. 3312 isn’t the only attempt to deal with this problem. The Senate has been struggling with its own measures, and Florida legislators are proposing a competing market set up by private insurers.
The Bilirakis bill does a couple things: First, it caps the maximum flood insurance premium levied on a structure at 1/30th of the property’s appraised value at the time of sale. This is based on the concept of a 30-year mortgage and is meant to establish a baseline of coverage.
Second, it would spread any increase over current premiums across a 10-year phase-in period, during which time the premium would get incrementally higher until it reached the maximum. FEMA, which evaluates the amount of risk faced by each property, would have the flexibility to determine that rate of increase. The bill would allow homeowners to pay for flood coverage in monthly installments, instead of an annual lump sum payment.
So, using the example of a $100,000 home, the annual premium would be limited to 1/30th of $100,000, or $3,333.33 per year (we’ll round down, but actuaries probably won’t be as generous). Spread out over 12 months, that would be a monthly payment of $277.77. A $250,000 home would have a maximum premium of $8,333.33, with a $694.44 monthly payment, and so on. Only in Florida would an insurance bill that high be considered reasonable, but it still provides a cap to the exorbitant rates possible under Biggert-Waters. It’s also quite a bit higher than a couple of hundred dollars a year.
Bilirakis told Bay News 9 his bill would limit a $100,000 home’s flood insurance bill to "$200 to $300 annually." That didn’t add up to us, and when we asked his office about it, they told us he meant to say "monthly", not "annually."
We do appreciate it when elected leaders admit they’re wrong. Unfortunately for homeowners paying for flood insurance, Bilirakis used the wrong word in the interview, and we have to rate the wording of this particular statement False.
Bay News 9 interview with Gus Bilirakis, Jan. 2, 2014
Tampa Bay Times, Bilirakis bill calls for longer phase-in and caps on flood insurance rate hikes, Oct. 24, 2013
Tampa Bay Times, State lawmakers propose solution to flood insurance crisis, Dec. 17, 2013
Tampa Bay Times, Flood-insurance hikes ravage Tampa Bay neighborhood home sales, Dec. 29, 2013
Tampa Bay Times, Attempt in Washington to stop flood insurance rate hikes fizzled, Dec. 20, 2013
PolitiFact Florida, Rick Scott says Floridians pay far more into flood insurance than they get back in claims, Sept. 25, 2013
General Accounting Office, "Flood insurance: Implications of changing insurance and coverage limits," July 3, 2013
113th Congress, Text of H.R. 3312, accessed Jan. 3, 2014
GovTrack.us, H.R. 3312: Homeowners Flood Insurance Relief Act of 2013, accessed Jan. 3, 2014
FEMA.gov, Questions about the Biggert-Waters Flood Insurance Reform Act of 2012, accessed Jan. 6, 2014
FEMA.gov, NFIP Policyholders: Total Number of Subsidized Policies by State and County, accessed Jan. 6, 2014
Interview with Sarah Criser, Rep. Bilirakis press secretary, Jan. 6, 2014
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