Flood Insurance Premium Refunds in Process

The Federal Emergency Management Agency (FEMA) is being praised for moving quickly and ahead of schedule to get $100 million in flood insurance premium refunds into the hands of the one million policyholders who “overpaid” under the Biggert-Waters Act that hiked premiums for many last year. Write Your Own (WYO) flood insurers are to begin mailing checks Oct. 1 and should be done by the end of the year under the FEMA administrative orders.

The refunds are required under the Homeowners Flood Insurance Affordability Act (HFIAA), which Congress passed in March in response to complaints about Biggert-Waters reforms. HFIAA backtracks on the fiscal reforms of Biggert-Waters and stops many of the increases, restores the subsidies and mandates refunds for about one million policyholders.

FEMA said the refunds will range from a few dollars to a high of $10,000 or more but the average refund will be $100.

The refunds under HFIAA will be going to people who purchased new homes after Biggert-Waters became law in July 2012, or who didn’t have flood insurance before that date, or whose insurance lapsed. Their revised premiums will be based on premium schedules in effect Oct. 1, 2013.

Not everyone gets refunds or reduced rates under HFIAA. Close to 80 percent of NFIP policyholders paid a full-risk rate prior to either Biggert-Waters or HFIAA and are “minimally impacted” by either law, according to Craig Fugate, the administrator for FEMA, which administers the National Flood Insurance Program (NFIP).

HFIAA requires gradual rate increases of five to 15 percent (but no more than 18 percent for any individual policyholder) on properties now receiving subsidized rates instead of immediate increases to full-risk rates as happened under Biggert-Waters. These gradual rates will start Oct. 1 2014. However, there are some exceptions to these general rules and limitations, too.

Older commercial properties, non-residential properties, severe repetitive loss properties and buildings that have been severely damaged that now have subsidized rates will continue to see up to a 25 percent annual increase until they reach their full-risk rate, according to FEMA.

Sen. Mary Landrieu, D.-La., chaired a recent hearing of the Senate Appropriations Subcommittee on Homeland Security on improving the accuracy of flood maps that presented an opportunity to report on the HFIAA.

Those testifying included Sen. Robert Menendez, D-N.J.; Fugate, FEMA administrator; Patricia Templeton-Jones, executive vice president of Wright National Flood Insurance Co. representing the Property Casualty Insurers Association of America; and Donna Smith, chair of the National Association of Realtors flood insurance task force. The Independent Insurance Agents and Brokers of America (Big “I”) also submitted testimony.

FEMA was also praised for moving quickly to restore the “grandfathering” of properties and suspending the “triggers” that caused immediate loss of subsidies under Biggert-Waters. Also, NFIP staff was heralded for holding regular conference calls with industry stakeholders on HFIAA and often implementing technical advice provided during these calls.

“In stark contrast to the uncertainty and confusion during the initial implementation of Biggert-Waters, we are happy to report to the committee that, to date, the roll-out of HFIAA has gone rather smoothly,” said Charles Symington, Big “I” senior vice president for external and government affairs.

“FEMA seems determined to get the law’s implementation right, this time,” said NAR’s Smith, who is a broker with Berkshire Hathaway Home Services, C. Dan Joyner Realtors in Greenville, South Carolina.

Smith said that within a month of HFIAA’s enactment, FEMA issued rate-relief guidelines to insurers so that homebuyers would not have to pay more than current owners would at the time of their next flood insurance policy renewal. The relief also applies to current homeowners who bought a new policy or let one lapse, not just to owners who bought property after the Biggert-Waters act went into effect last year.

Within two months of implementation, FEMA announced its intention to hold 2013 rates constant through 2015 and in some cases even reduce rates. NAR, which said it has received no real consumer complaints since HFIAA passed, also thanked FEMA for providing timely guidance to insurers on the refunds.

Sen. Landrieu, who said she was happy to learn of the positive reports from the businesses interests, pressed FEMA’s Fugate on the need for more accurate flood maps. FEMA’s Fugate said that about 50 percent of all flood maps are current, 40 percent are in need of review, and 10 percent are out of date. Landrieu vowed to get FEMA the money it needs to update all maps by 2017, when NFIP is up for renewal.