09These days our office is fielding more and more calls from people on Long Island and elsewhere who have gotten big increases in their flood insurance rates. In most cases, the increases are NOT correct, but many insurance agents and brokers who don’t write that much flood insurance are also not sure why the rate went up in each case, and then not sure what to do to correct it.

The short version of the story is that back in 2012, a few months before Sandy hit Long Island, New Jersey, and Connecticut and did a huge amount of flood damage, congress passed a change to the National Flood Insurance Program called the Biggert-Waters Act. The basic problem is that the FEMA flood insurance program is losing large amounts of money, and only collecting about 25% of what they pay out in claims. Biggert-Waters made many changes but most especially called for large rate increases on homes built before the National Flood Insurance Program went into effect. The increases would only take effect when the homes were sold, or if the home was not the primary residence of the owner (in other words, a seasonal or vacation home, or a rental property). There were many other changes as well.

After the dust settled from Sandy and the real estate agents groups found out what the Biggert-Waters Act was doing to the resale values of older homes, they called forth the lobbyists who eventually worked out the Flood Insurance Affordability Act which took effect in May of this year. This basically undid most (though not all) of the changes that were contained in Biggert-Waters.

However, the companies that service the National Flood Insurance Program on behalf of FEMA and the federal government were not able to make all the changes needed to their computer systems to undo the Biggert-Waters changes which had only  taken effect a year or so earlier. So many Long Island flood insurance policies are coming in with much higher rates that WOULD HAVE been correct under Biggert Waters. Theoretically the insurance companies are supposed to make the corrections, but practically speaking, for now it’s up to the insured to question the increase, and his or her agent or broker should be able to help get it corrected.