Flood insurance Premiums going up April 1st

[TomTerrific]

Another reason I moved to Kentucky.

They have the same problems here but on a much lesser scale.

 

[CEHollier]

I contracted our sons house in Legacy Hills on Hwy 74 in Geismar last year. The lot was two inches below the floodplain so he had to get flood insurance. Ascension Parish requires new construction to be elevated one foot above the floodplain. We raised the pad one foot two inches to be safe. So his house and garage are one foot two inches above the floodplain. But because his lot is in the floodplain map he pays $500 a year flood insurance. This year he will get his house LOMA (Letter of Map Amendment) out through FEMA. It costs $500 to do but he will not be required to have flood insurance. The area has never flooded. When FEMA changed the flood maps post Katrina it included his subdivision. Even with the gully wash that flooded a lot of property last year in Ascension Parish his street was clear of water. Personally I believe FEMA encompassed more areas that will never flood just to lower premiums for people who live in areas that definitely will flood at some time in the future.

 

[CatCam]

NFIP - should have a surplus of funds.........

The info below is up to 2012 -- Please note that in 2013 & 2014 no widespread flooding occurred so another $4 billion should be in the coffers!


The NFIP Premiums Collected vs. Losses Paid

When measured in 2012 Dollars, the NFIP has collected almost $9 billion more in premiums than it has paid out to policy holders since 1978.

* $65.3 billion in premiums were collected
* $56.4 billion were paid out to policy holders

Katrina resulted in a liability of nearly $18 billion to the NFIP.

* By 2015 the NFIP had collected over $15 billion more in premiums than it had paid out to date in 2012 dollars.

However, since the 2005 season, the NFIP should have returned to solvency even after making up for the losses of Hurricane Katrina.

* By 2007 the NFIP had returned to net solvency when only accounting for premiums collected and losses paid.
* From 2009 to 2012, the NFIP took in an average of $1.9 billion more in premiums per year than paid out.
* In 2012 the NFIP had accumulated $8.9 billion more that it had paid out to date.

References:
https://www.fema.gov/statistics-calendar-year/total-earned-premium-calendar-year
https://www.fema.gov/statistics-calendar-year/loss-dollars-paid-calendar-year

 

[gbundersea]

There are some excellent posts in this thread. You guys are nailing it.

If you haven’t already, read my 4-part series on flood insurance for some details, background, and my opinions.

What we’re seeing with these increases is the result of the “fix SOME of the Biggert-Waters Act” legislation that was passed last year. Short version is that Biggert-Waters was a disaster which pulled the rug out from under countless homeowners, and would have caused widespread foreclosures and hardship. Last year’s band-aid “fix-it” law took the edge off of much of Biggert-Waters, but in my opinion is simply a delaying tactic.

Make no mistake – the idiots in DC are hell-bent on squeezing the money out of American homeowners! I find the financial reporting posted in this thread to be VERY interesting. It infuriates me even more that they HAD the money, then blew it, or pissed it away into the general fund, or whatever. And now homeowners get to pay for a “shortfall” that wasn’t there. Unreal, but sadly typical too.

As I state in my articles linked above, the .gov NEVER should have gotten into the insurance business. (Or General Motors, or mortgages, or healthcare. But I digress…) However, since they did, and established rates and standards, and made promises such as grandfathering, etc. which homeowners relied on, then they should abide by what they set up. Instead, they are indeed changing things drastically midstream, and as always, it’s the taxpayer who gets screwed.

I can understand them not writing new policies for severe repetitive loss properties, or those well below BFE, etc. (Remember, it’s our tax money that pays the claims.) But they should honor what was previously promised, and not use a shotgun approach on any legitimate changes. If a change is called for, they should evaluate each house and its claim history and rate it accordingly, instead of issuing a blanket modification for all homes in a large area.

However, I fully expect they will continue to hold everyone over a cliff as they drain our pockets and spend the USA into insolvency. Rates are indeed likely to keep “increasing to actuarial levels” meaning we’ll still get screwed by the exorbitant rates of Biggert-Waters, just not quite as soon. And this is supposed to be a good thing? Nope.

The ideal scenario would be that the .gov would GTFO of writing insurance so that private insurers can step in and offer affordable coverage. There is at least 1 source of private flood insurance available in Louisiana. It is from PrivateMarketFlood.com. They are underwritten by Lloyd’s of London, and offer flood coverage in 34 states as of this post. There are a couple of restrictions, and they don’t cover Orleans, Jefferson, or St. Bernard parishes, but they do NOT factor in the flood elevation! As a result, their rates are not cheap, but on properties lying below BFE, they are a huge bargain compared to NFIP.

My longtime insurance agent, Bayoushooter’s own LACamper, (who by the way is a flood GURU, and whose advice saved our asses when we lost our house to Katrina) said he once saw a standard flood policy on a property lying 4’ below BFE. The annual premium was about $8,000.00. We recently sold a listing which was 6’ below BFE! I talked it over with LACamper, and our best estimate on an NFIP policy for that house was probably $10-$12K. (Agents can’t even quote properties at -2’ or below; FEMA has to do it themselves.)

I did the online quote for this property with PrivateMarketFlood, and it was around $1600-$2000 per year depending on deductible, contents coverage, etc. This is MUCH better than NFIP’s ridiculous cost.

As a side note, the house sold recently. We didn’t represent the buyers; they had their own real estate agent. Apparently they went with an NFIP policy based on a pre-FIRM rate, as the cost was about $1,800/year. However, this in my opinion was risky, as if/when the .gov changes their mind and unleashes Biggert-Waters again, they could lose the pre-FIRM rate. Or, if they improve the property enough to raise its value by 50% or more, the pre-FIRM rate goes away. We passed along everything we knew about the property, even the brand-new elevation certificate, to everyone who considered this house, including the people who ultimately bought it. How they addressed the flood insurance issue was their decision to make.

It pains me to hear about the NFIP’s nonsense affecting people’s lives. Unfortunately, it’s the result of a bankrupt government run by idiots.

 

[Jack]

The info below is up to 2012 -- Please note that in 2013 & 2014 no widespread flooding occurred so another $4 billion should be in the coffers!


The NFIP Premiums Collected vs. Losses Paid

When measured in 2012 Dollars, the NFIP has collected almost $9 billion more in premiums than it has paid out to policy holders since 1978.

* $65.3 billion in premiums were collected
* $56.4 billion were paid out to policy holders

Katrina resulted in a liability of nearly $18 billion to the NFIP.

* By 2015 the NFIP had collected over $15 billion more in premiums than it had paid out to date in 2012 dollars.

However, since the 2005 season, the NFIP should have returned to solvency even after making up for the losses of Hurricane Katrina.

* By 2007 the NFIP had returned to net solvency when only accounting for premiums collected and losses paid.
* From 2009 to 2012, the NFIP took in an average of $1.9 billion more in premiums per year than paid out.
* In 2012 the NFIP had accumulated $8.9 billion more that it had paid out to date.

References:
https://www.fema.gov/statistics-calendar-year/total-earned-premium-calendar-year
https://www.fema.gov/statistics-calendar-year/loss-dollars-paid-calendar-year

These numbers don't account for what you said earlier in the thread.

Almost 30% of your flood insurance premium NEVER gets to NFIP -- Independent Insurance agents/companies who "administer" the flood policy take 28% and 2% goes to taxes.....that's right they take 28% WITHOUT any risk because FEMA pays! What a scam. -- but our Fed. government allows it!

Remove 30% of the premiums collected and see where that gets you.

 

[CEHollier]

Greg - What has the Federal Government touched that didn't turn to sh*t? Their fix is always pay more money.

 

[LACamper]

The NFIP Premiums Collected vs. Losses Paid
When measured in 2012 Dollars, the NFIP has collected almost $9 billion more in premiums than it has paid out to policy holders since 1978.
* $65.3 billion in premiums were collected
* $56.4 billion were paid out to policy holders
Katrina resulted in a liability of nearly $18 billion to the NFIP.
* By 2015 the NFIP had collected over $15 billion more in premiums than it had paid out to date in 2012 dollars.
However, since the 2005 season, the NFIP should have returned to solvency even after making up for the losses of Hurricane Katrina.
* By 2007 the NFIP had returned to net solvency when only accounting for premiums collected and losses paid.
* From 2009 to 2012, the NFIP took in an average of $1.9 billion more in premiums per year than paid out.
* In 2012 the NFIP had accumulated $8.9 billion more that it had paid out to date.
References:
https://www.fema.gov/statistics-calendar-year/total-earned-premium-calendar-year
https://www.fema.gov/statistics-calendar-year/loss-dollars-paid-calendar-year

I'm not disputing your figures but keep in mind that just because we didn't have a huge hurricane doesn't mean claims weren't paid. Isaac was a disaster in LaPlace but hardly a blip in FEMA's eyes. Sandy was huge though in monetary terms. There are plenty of small flood claims that get handled every year involving just a few homes. Don't forget the administrative cost of processing claims. Each claim file is huge and has to be worked wet item by wet item. Time consuming doesn't scratch the surface!

Speaking of Sandy, one interesting bit of trivia came to light. Did you know that probably 80%+ of FEMA adjusters come from southern states? Mainly AL, LA, FL, and TX (Worley is based in Hammond for example). What I was hearing from Sandy adjusters was that they were showing up in NY and they weren't welcomed with open arms. They kept getting 'get these hicks out of here and send us the real FEMA adjusters!'. It took a while for word to get around that the southerners were all they were going to get!

Thanks Greg (though Guru might be a stretch... its hard for us to keep up with all of FEMA's changes!). The articles are excellent!

 

[CatCam]

These numbers don't account for what you said earlier in the thread.



Remove 30% of the premiums collected and see where that gets you.

EXACTLY, Jack -- you get it now! So you see, the problem isn't with the small % that is getting ready to take the proverbial shaft - it is with the way NFIP operates. So don't take the mismanagement of the program and thrust this upon a select few to shoulder the PROBLEM!

Katrina payouts were GROSSLY excessive. NFIP didn't have enough claims adjusters to go out and see homes - so my neighbor whose home got a whopping 3" of water got a full policy payout. They are now on their 3rd new car since Katrina, paid for with their NFIP flood insurance payout of $200K. FEMA/NFIP did full payouts based upon the zip code of the residence. No adjuster EVER visited the home. They told their insurance agent (the guy who gets 28% of the premium) they got water in their house and a few weeks later there was a big fat check waiting for them. I know this 1st hand from NUMEROUS local homeowners.

 

[LACamper]

Agents don't get 28%. The carrier and agent together might get 28%... so on a typical $500 premium the agent gets maybe $70. With that he has to pay payroll, rent, insurance, taxes, etc.

Most retail businesses have a markup on their products of 50% to 100%. Is this any different?

 

[Nomad.2nd]

As I state in my articles linked above, the .gov NEVER should have gotten into the insurance business.....
It pains me to hear about the NFIP’s nonsense affecting people’s lives. Unfortunately, it’s the result of a bankrupt government run by idiots.

I am no fan of government involvement in the private sector. ESPECIALLY when they make profits private and losses public!
But lets be clear about why/when they got involved.
They got involved when private insurers would no longer insure many homes.... there would be HUGE chunks of La right now without flood insurance if they couldn't get it from the government.
(And perhaps they shouldn't have it.)
But the gov reacted to the screaming constituents.

What I was hearing from Sandy adjusters was that they were showing up in NY and they weren't welcomed with open arms. They kept getting 'get these hicks out of here and send us the real FEMA adjusters!'. It took a while for word to get around that the southerners were all they were going to get!
!

I worked NJ and NY following sandy... I experienced the exact opposite reaction.

Perhaps they were assholes.

They told their insurance agent (the guy who gets 28% of the premium) they got water in their house and a few weeks later there was a big fat check waiting for them. I know this 1st hand from NUMEROUS local homeowners.

It's been my experience that homeowners are the least reliable source of information.

Here's the Rates:
http://www.fema.gov/media-library-data/20130726-1623-20490-6622/adj_feesched.pdf
(You'll note when it comes to actual %'s your 25% off, and a premium is not involved in any way.)

Also please keep in mind that the adjuster (NOT An agent... agents get theirs off the premium, not the payout, agents have NOTHING to do with paying the claim.) must front ALL EXPENSES (As well as pay expenses out of that, AND split it with the company they are contracted to if a freelancer.) and it takes MONTHS to get paid.
I have quite honestly been paid for claims I closed out more than 365 days before (Not often, but it's happened)