Cassidy files bill to delay flood insurance changes; locals fear hefty rate hikes
NEW ORLEANS (WVUE) - As the clock ticks toward the start of changes to the National Flood Insurance Program, Sen. Bill Cassidy, R-Louisiana, introduced a bill he co-sponsored with a group of other senators to require FEMA to delay the start of Risk Rating 2.0 until September 2022. The program is set to take effect on October 1.
Ross Fayard is glad his renewal premium will not be due until next year given concerns that Risk Rating 2.0 will significantly increase premiums.
“My renewal is good for another year which I’m fortunate but starting next policy I will see a difference in that and that’s something I’m definitely not looking forward to, but what can you do?” said Fayard.
He says the cost of his policy is $796 even though he just moved into a new home. But he expects it to increase, and he joins many Louisiana homeowners who are worried that FEMA’s new pricing methodology will cause astronomical increases in premiums in coming years for existing policyholders. New flood insurance policyholders will be charged the new rates immediately.
Fayard is also an insurance agent in Slidell.
“New policies, if you can’t assume it or if you’re building a new construction, you’re going to get smacked with that outrageous, no if, ands or buts about it,” said Fayard.
Dan Burghardt is a longtime insurance agent who says he looked at some of the rates.
“The rates will basically go up maybe $10 to $20 a month based on the exposure, where are you located,” said Burghardt.
People living near water could face significant increases in the cost of flood insurance.
“Anyone buying a new house effective October 1st they’re going to be paying the new rate increases. The new rates will probably affect 80% of the state as far as increases. Twenty percent will see a slight decrease,” said Burghardt.
FEMA issued a news release this week saying that beginning on October 1, the National Flood Insurance Program will begin to offer more equitable and risk-informed rates.
“The NFIP’s new rating methodology is long overdue since it hasn’t been updated in more than 40 years,” said David Maurstad, Senior Executive of the National Flood Insurance Program. “Now is the right time to modernize how risk is identified, priced and communicated. By doing so we empower policyholders to make informed decisions to protect their homes and businesses from life-changing flooding events that will strike in the months and years ahead due to climate change.”
Changes to the flood insurance program have been weighed for years.
“The kind of genesis of this goes back to when I was in the House of Representatives and there was proposal to begin increasing rates dramatically, so much so that homeowners would just drop their keys on the desk of the banker because they could not afford to have their home anymore,” said Cassidy.
Senator Cassidy also joined a group of senators in writing a letter to FEMA on September 22 urging FEMA to delay the changes. Congressmen Steve Scalise and Garret Graves of Louisiana also wrote a letter urging the same.
During a call with a journalist on Tuesday, Cassidy spoke about what could be a negative impact on the already financially challenged flood insurance program if premiums become unaffordable.
“The non-partisan Congressional Budget Office models it after implementation of Risk Rating 2.0, 900,000 policyholders or almost 20% of the program will drop flood insurance. This would cause a death spiral to the program,” said Cassidy.
Jeff Albright is CEO of Independent Insurance Agents & Brokers of Louisiana.
“Only Congress is able to solve this problem and it seems to me that Congress needs to debate and decide have the rules that FEMA and NFIP have operated under for the last 60 years been fair and appropriate. Is it fair to change the rules on people who bought property with the promise of grandfathered flood insurance rates?” said Albright.
He said FEMA should make public information about long-term rate hikes under the program.
“One of our concerns is that NFIP and FEMA have been talking about the annual increases and the annual increases are relatively modest; what they’ve not done a good job in our opinion is really outlining the long-term ultimate rate impact, what is the maximum premium going to be when you get 18% rate increases for five, six, eight, 10 years?” said Albright.
Burghardt agrees higher premiums will affect properties in the future.
“It could devastate the value of the property over a period of time,” he said.
And there are concerns higher premiums will stymie the home construction industry in Louisiana and hurt the economy in the process. “In a nutshell, October 1st, that’s going to be the beginning of the end for new constructions here in Louisiana, it’s just terrible man, it really is,” said Fayard.
A FEMA spokesperson did address questions from FOX 8 on whether the agency would delay the program in response to requests. But she said, “The figures in the Senate letter are misleading and are taken out of context. Risk Rating 2.0 will result in a net increase in the number of people who purchase flood insurance in the next 10 years.”
While it remains to be seen whether the U.S. Senate and House of Representatives will act on the new legislation and force a one-year delay in Risk Rating 2.0, Cassidy says the White House can stop it without congressional action.
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