Congressional Spending Plan Would Curb Some Flood Insurance Hikes

By Andrew G. Simpson | January 15, 2014
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  • January 15, 2014 at 11:41 am
    Squandered Youth says:
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    In the battle to save homeowners, this is not the end, or even the begining of the end, but at least the end of the beginning. It is the first acknowledgement by the federal government that FEMA’s implementation of B-W threatens a nightmare that would probably cost $2 in lost property values for each dollar of NFIP debt it retires. B-W is indefensible, and it has to go.

    It is fitting that the roll-back begin with grandfathering. The main problem with B-W is that by including the pre-existing NFIP debt as part of calculating “risk,” it puts the lion’s share of the burden of retiring this debt on a relatively small number of non-subsidized post-FIRM homes, built to specified standards and already paying actuarial rates, that have the ill-fortune to lose in the rigged game of re-mapping roulette.

    Something is obviously wrong when the means used to allocate repayment of a pre-existing debt that has nothing to do with the actuarial risk of a particular property results in the imposition of $5000 to $10,000 or more annual increases on homeowners held hostage by the requirement they participate in the NFIP.

    • January 15, 2014 at 1:20 pm
      jack says:
      Hot debate. What do you think?
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      Squandered- Funny, I feel the same way when I’m held hostage to pay tens of thousands in taxes to pay for a SNAP EBT card for forth generation ghetto dwelling democrats. just saying!

      • January 15, 2014 at 2:56 pm
        You don't say, Jack says:
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        There you go again!!!

      • January 15, 2014 at 3:08 pm
        jack says:
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        Just wrote another tax check for $28k. Every one of you Democrats can kiss my azz!

        • January 15, 2014 at 3:31 pm
          Libby says:
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          What do democrats have to do with you paying your taxes? Taxes are actually lower than they were in 2000. Obama kept the Bush tax decreases in place for the middle class. You need to do some research before you go blaming Democrats for your taxes, which BTW, EVERYBODY has to pay.

    • January 15, 2014 at 1:30 pm
      dry on banks says:
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      The elimination of all future grandfathering; specifically for post-FIRM structures prevents property owners from EVER being able to quantify risk. The datum will be forever a moving target; impossible to plan and construct to meet. The overwhelming debt of the program can be linked to pre-FIRM structures; while it is unfortunate to impose new-nonsubsidized rates to such structures it would seem that would be the appropriate process. While painful for those property owners; it would allow for them to retrofit or rebuild to defined datum and reassess the risk.
      Their are economic limits to constructing structures higher above existing grades. Far beyond just building materials and labor. Proper siting of structures, egress-ingress, and local zoning ordinances all factor into the ability and cost of constructing elevated structures. The 2nd, 3rd, etc derivative effects of this legislation have yet to be realized nor quantified.
      Requiring everyone to simply pay more is not a SOLUTION!

  • January 15, 2014 at 1:32 pm
    bob says:
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    so squandered youth has no problem for me subsidizing his flood insurance (via my tax dollars) in spite of the fact I don’t live in a flood hazard area and need coverage like he does? $20 billion in debt and he thinks the existing flood program is fair?

    • January 15, 2014 at 2:00 pm
      Squandered Youth says:
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      You don’t subsidize my flood insurance since I already pay actuarial rates on my unsubsidized, post-FIRM property. A $15k annual premium for $250k coverage on a property that (rough figures) might make a $40k claim every 40 years is not an actuarial rate, but the product of me being forced by the federal insurance mandate to shoulder a disproportionate share of a deficit run up by a federal program. While it doesn’t matter to my argument, it is worth noting this deficit was created before I purchased my property. A substantial portion of that deficit is due to the peoples’ elected representatives deciding to grossly overpay for administrative expenses provided by WYO insurers. Most of the remainder is due to the peoples’ representatives deciding to use payments through the NFIP as a means of covering a multitude of sins in the response to Katrina. The NFIP’s premiums were high enough to handle either of these bad decisions – but not both. I have no more responsibility for those bad decisions than you, and should not have to pay any more than you to retire the resulting deficit.

      • January 15, 2014 at 2:08 pm
        Libby says:
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        While I don’t support the increase in rates B-W call for, a 30% admiminstrative expense rate for WYO carriers is not at all grossly overpaid. In fact, it is on the low side with which P&C carriers usually operate. Administrative expenses include staffing, claims expense, commissions to agents, and overhead and usually run about 35% for an average P&C carrier.

        • January 15, 2014 at 5:08 pm
          Squandered Youth says:
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          Libby, that surprises me, but the whole purpose of dialog is so we can educate each other. Why does P/C have a 35% admin expense when the ACA caps admin. charges for health insurers at 15% and it has to be simpler to administer flood insurance than health insurance? How much does a WYO save by virtue of the fact that FEMA assumes all the risk and takes care of a lot of what would otherwise be overhead to a private insurer when it defines the terms of coverage?

        • January 15, 2014 at 10:10 pm
          okt0ber says:
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          Why would they need 30%?? There is absolutely no actuarial work, and the computer systems are standardized across many WYO carriers. The claims expenses and only realized when catastrophes happen. The only constant is call center staffing and agent commissions. I’d say 33% is high… 20% should be sufficient…

        • January 16, 2014 at 8:50 am
          Libby says:
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          I can’t say what they need or don’t need, but you have to take into account 5% in commissions off the top. Then you have to staff for underwriting and claims, whether you write business or have claims (which can happen without a catastrophe.) Heat, lights, power, phone, fax, computers etc. Oh! And they are entitled to some profit, as well.

          As far as 15% for health insurers, I found this link that says that is reasonable:

          http://www.investopedia.com/terms/m/medical-cost-ratio.asp

      • January 15, 2014 at 2:19 pm
        Scott Wheeler says:
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        Squandered… what state are you in. I may be able to reduce your flood insurance in a private market by 33% if you are currently paying 15k. SFI Group, Inc has a private market product available in those states where we are licensed to sell insurance.

        • January 15, 2014 at 10:07 pm
          okt0ber says:
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          Scott, we have renewals every week coming in at $15,000 for pre-firm structures. That isn’t all that uncommon across the south now… I’m basically telling my customers to sell their homes for land value and let the buyers tear them down to build a new house… It’s destroying billions of dollars worth of property value.

          • January 16, 2014 at 8:45 am
            Scott Wheeler says:
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            call me 910-329-4443 we have a private market flood product that we can help you with for your owners.

  • January 15, 2014 at 1:37 pm
    Baxtor says:
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    That’s a very nice picture of our capital. I wonder what type of camera they used. It’s very clear.

    • January 15, 2014 at 1:44 pm
      jack says:
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      And the flag has 57 stars on it.

      • January 15, 2014 at 2:58 pm
        You don't say, Jack says:
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        At it again, I see

  • January 15, 2014 at 1:42 pm
    C says:
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    Squandered has no difficulty with me subsidizing flood insurance when I supposedly don’t live in a flood prone area. I am near no body of water. FEMA did not help me when my house flooded because my city and the developer did not put in a proper sewer system. We worked as a community to fix the problem. We did not get FEMA help nor were we grandfathered into a protection. I have lived on a river in the past and learned the pitfalls. I choose not to repeat those mistakes. If you choose to live in those ares, pay the price. It is a choice.

    • January 15, 2014 at 10:08 pm
      okt0ber says:
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      Taxpayers don’t subsidize the flood insurance program. Check your facts, bud. It’s an independent program that has not taken taxpayer money since the 1960s. Try again.

      • January 16, 2014 at 9:02 am
        Scott Wheeler says:
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        While it is true that the tax payer is not actually subsidizing the NFIP, it has actually borrowed tax payer money. We have yet to see if it will be able to pay the amount borrowed back to the taxpayer. The elimination of these subsidies for Pre-FIRM homes will not pay the amount back, because people will either go without insurance or they will allow the banks to force place insurance for much lower rates than the 30k to 40k I have been seeing. In both cases taking the property out of the program and reducing the overall income of the program, which it needs just to be able to pay the interest charges on 24plus billion of debt! Of course the third option is to tear down and rebuild or raise the current structure to make it compliant with current code. Costs for raising the structure will likely be 35 to 50k per structure for reasonably sized structures.

        I personally own a Pre-FIRM structure in Surf City, NC and will drop flood insurance on it as soon as I have the building paid off in about three years.

        • January 16, 2014 at 12:02 pm
          Melissa Halsted says:
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          I don’t carry flood insurance for this very reason. Now my home is completely devalued and I can’t sell it until this ridiculous problem is fixed. Thanks for nothing, congress!

      • January 16, 2014 at 1:12 pm
        KY jw says:
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        Ok, okt0ber, to who or what do you think the NFIP owes approximately $20B?

  • January 16, 2014 at 8:50 am
    Richard Lowe says:
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    Everyone benefits from water – drinking it to stay alive, washing, bathing, playing in or on, fishing, looking and watching.

    So why should FLOOD INSURANCE be singled out to a certain few. Everyone will loose if the businesses or homes go vacant.

    Nobody knows where or when the next flood will occur!

    The burden of this property insurance should be carried by all – SPREAD THE RISK TO KEEP IT AFFORDABLE! THAT’S WHAT INSURANCE IS ALL ABOUT TO BEGIN WITH!

    MAKE IT MANDATORY ON EVERY PROPERTY INSURANCE POLICY! Increase the number of insured! B/W does just the opposite and will drastically reduce the number of insured.

    My house has not been flooded in over 70 years. I own it outright. I will self insure. B/W makes it impossible for resale!

    WHAT IS BEING ACCOMPLISHED IS JUT THE OPPOSITE OF WHAT IS NEEDED!

  • January 16, 2014 at 8:58 am
    Richard Lowe says:
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    Another government disaster! Where are the brains? Allowing a 35% fee for a mandatory policy edict for mortgage loans. Outrageous!

    • January 16, 2014 at 10:10 am
      Libby says:
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      It’s not 35% and it’s not a fee. It’s a percentage of premium for expenses. Can your business run with no expenses?

  • January 17, 2014 at 10:27 am
    Jenn says:
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    B-W Act is going to ruin the neighborhoods and economy in my town! My Flood insurance is going up from $256 per year to $3233 per year! We live in a small town along the Ohio river which has not seen a flood in over ten years and when it does flood it backs up through the storm drains and into our basements. This is totally ridiculous to expect the average middle class communities to be able to afford increases like this. It is lifestyle changing to some of our neighbors!

    • January 20, 2014 at 8:38 am
      Scott Wheeler says:
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      Jenn says:

      Jenn says:

      B-W Act is going to ruin the neighborhoods and economy in my town! My Flood insurance is going up from $256 per year to $3233 per year! We live in a small town along the Ohio river which has not seen a flood in over ten years and when it does flood it backs up through the storm drains and into our basements. This is totally ridiculous to expect the average middle class communities to be able to afford increases like this. It is lifestyle changing to some of our neighbors!

      I suggest you call Speaker Boehner and notify his office of the tremendous increase you just received. He has already said the House is not going to revisit BW-12.

  • January 18, 2014 at 8:34 pm
    jim kauffman says:
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    I purchased a home in a canal community,late 2012. I had no information on Biggert/waters presented to me. 90k of working mans money put toward a retirement home. my insurance/taxes now exceed my principle by a factor of 3. I will never own my home. I’m a vet. no arrests. Our government should protect us,not steal our dreams.

    • January 28, 2014 at 3:33 pm
      Shay Lynn says:
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      Jim K–
      It’s unfortunate that your insurance agent as well as any RE agent/broker didn’t inform you of the reform laws and how they would affect you prior to policy and land purchase. I am finding many insurance representatives know very little about the reform STILL.

      • February 6, 2014 at 5:33 pm
        Julie says:
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        All too true! I too have had contact with a lady who was told that she needed to hurry and purchase her house in before July 6 2013. So she did. Rushed her closing and ended up closing on a few days before July 6 2012. She was sadly misinformed! The BW-12 was passed in 2012, hence the name Biggert Waters Act of 2012. Her home she just purchased is currently under $400, she got a quote on what it will be now and it is over $1300. This is such a shame. I am an insurance agent and there is no excuse for misinforming a person to this extent. Such a shame!



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