View this article online: https://www.insurancejournal.com/news/east/2014/04/01/324881.htm
Steve Morris lives in a century-old restored cottage on a tucked away corner of Narragansett Bay in Rhode Island. The home survived big hurricanes in 1938 and 1954, and Morris has never worried about flooding.
But the home is now for sale, Morris said, because of rising flood insurance premiums.
“These increases are going to have a devastating effect on any community that’s coastal,” Morris said. “We’re going to get hit very badly. You could see working-class communities just wiped out because people just can’t afford it.”
Nearly 7,000 Rhode Island homeowners and businesses could see their flood insurance premiums rise annually by double digit percentages as government-backed insurance subsidies are scaled back, according to an Associated Press analysis of data from the National Flood Insurance Program.
President Barack Obama signed a law on March 21 putting the brakes on a 2012 overhaul that aimed to shore-up the program by requiring policyholders to begin paying risk-based rates, but the measure merely delays the premium increases that will hit as many as 1.1 million policyholders nationally.
In Rhode Island, the 6,852 policyholders receiving discounted rates as of December 2012 will see their costs go up annually. Homeowners will see their rates go up as much as 18 percent each year and owners of businesses and second homes will face an annual mandatory 25 percent rate increase until they switch to a risk-based rate.
While Morris no longer has to worry about his estimate that his rates would rise from $2,700 to $28,000 immediately, his rates will still go up every year.
“The bill provides relief,” said U.S. Sen. Jack Reed of Rhode Island, who along with fellow Democrat U.S. Sen. Sheldon Whitehouse joined the coalition that pushed the bill through the Senate which created the 18 percent cap.
Reed said he’s optimistic a solution can be found that ensures the flood program is financially sound without imposing back-breaking premium increases on residents. “Now we have to go back and look at the issue… it’s a very difficult balance.”
Warwick, R.I., Mayor Scott Avedisian, whose community has more policyholders facing increases than any other in the state, said that many residents have told him they’re afraid they’ll never be able to pay the mounting bills, and won’t be able to sell their homes because buyers won’t be able to afford flood insurance.
“You had people who bought a house, went through the financing, and then all of a sudden they’re being told their flood insurance is upward of $20,000, $26,000,” he said. “There are going to have to be federal subsidies somewhere. It’s just not going to work.”
According to Reed’s office, the National Flood Insurance Program has paid out more than $117 million in claims in Rhode Island since 1978, including $70 million following Superstorm Sandy and the floods of 2010.
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