Flood insurance costs prompt concerns; a non-profit discusses underestimated flood risks

NEW ORLEANS (WVUE) - Darrell Cheatham manicured the greenery outside his home in New Orleans’ Broadmoor neighborhood. The weather was great but sometimes rain can cause him problems.

“It’ll come up off the ground, you know, but once a year it might come into your house, it might come into my bottom, just about a foot,” said Cheatham.

Like many people in Louisiana, he is concerned about rising flood insurance premiums.

“Because, you know, it’s like impacting your mortgage, it’s impacting your monthly income because now you’ve got to put that into the equation,” said Cheatham.

Ricky LeBoeuf of Leithman-LeBoeuf Insurance says he is seeing the impact of FEMA’s Risk Rating 2.0.

“I think a lot of people will have some sticker shock,” said LeBoeuf.

FEMA implemented a new methodology for determining flood insurance rates.

“Policies increase every year usually with flood insurance somewhat but this year we’re seeing increases higher than normal, but they are being capped at 18% right now but that is per year and they can keep going up at 18%,” said LeBoeuf.

FEMA says it updated the National Flood Insurance Program’s risk rating to deliver flood insurance rates that are actuarily sound and that better reflect a property’s flood risk.

The First Street Foundation, a non-profit based in New York analyzed the economic impact of underestimated flood risk to properties and has its own flood risk model.

Jeremy Porter, Ph.D., is with the foundation.

“The flood risk model that was developed by First Street Foundation is a traditional hydro-dynamic flood model that produces high-resolution flood layers to the property.”

Further, Porter said, “This risk-based approach that we take at the First Street Foundation mirrors the flood models that underly the Risk Rating 2.0 approach.”

He says it provides valuable information to the public.

“By taking a look at the First Street Foundation’s flood layers you can start to get an understanding of what the risk-based approach looks like and what type of risk profile each property has.”

The Foundation looked at municipalities with the greatest difference between average expected loss and average premiums last year.

Lacombe, Covington, LaPlace, and Houma topped the list of 10 areas.

Porter was asked if people in those areas can expect an increase.

" Yeah, especially in those top 10 areas,” said Porter. “In that report, we were able to identify the areas that were most underpriced at this point by the current NFIP pricing structure.”

The foundation created FloodFactor.com to help property owners find their property’s flood risk. On the site, property owners can type in their addresses to get risk information.

“In coastal areas, you almost see across the country, and especially in southern Louisiana you see places where the old NFIP pricing structure was much lower than the actual risk-based pricing structure for insurance which is likely to mirror what Risk Rating 2.0 looks like,” said Porter.

Fearing devastating effects on homeowners, members of Louisiana’s congressional delegation have called on FEMA to halt Risk Rating 2.0. but that has not happened.

So, homeowners like Cheatham are seeing higher flood insurance premiums.

“It don’t never be what it was the year before,” he said.

LeBoeuf advises policyholders to respond right away if their insurance agent requests more information about their property.

Give them the new information because otherwise it’s filled in with default answers and that’s going to help their renewal premium,” said LeBoeuf. “They’re asking for the square footage, the number of stories in the building, whether the machinery is elevated above the first floor, things like that.”

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