“Fail as an elegant deployment”

The National Flood Insurance Program (NFIP) is nothing new to current homeowners living across the Rockaway Peninsula, however, those looking to purchase a new flood insurance policy after October 1. will wake up suddenly.

The Wave spoke with local insurance experts to better understand FEMA’s rollout of “Risk Rating 2.0” – a new program the agency touted as a “transformational step forward … ensure that tariff increases and decreases are both equitable ”.

John Lepore, owner of John Lepore insurance agency located in Rockaway Park, disagrees, saying the program “failed as a sleek rollout” and talks about the ambiguity that determines the rates, he says that “no one fully knows the secret sauce of this program”.

Lepore attributes a new “ambiguous 2.0 risk rating algorithm” to explain the drastic change in costs.

Lepore explains, “Let’s say you and your neighbor have identical houses but for some reason the algorithm used to determine the rate detects differences between the two houses. Maybe one of them is more prone to rain storm flooding or has had more flood claims in the past. We have no way of knowing because the weighted measures used to determine the premium were not disclosed. The result is that the two essentially identical risks can be assessed in very different ways.

Another change in the 2.0 risk rating from the previous program is the removal of “grandfathered” rates and Preferred Risk Policies (PRPs) that provide coverage at a lower rate.

The Grandfather is an NFIP rule that was created to recognize landowners who adopted a policy before zone maps went into effect, the pending map went into effect on August 24.

In a temporary grandfather fix, FEMA proposed a provision it calls “Glide Path,” although the terms of Glide Path are for a shorter period.

Preferred Premium Rates offer fixed combinations of building / content coverage limits or content only coverage.

It should be noted that the maximum NFIP payment for damage to a house is capped at $ 250,000, covering only building components and essentials to make the house habitable (electrical panel, water heater, etc.) , the PFP provided coverage for items such as replacement of drywall, furniture, etc.

Before Storm Sandy, the PFP cost as little as $ 100 for a policy holder and the addition was part of their basic flood policy.

Now, those looking to buy content policies will have to purchase separate, more expensive policies.

Although FEMA has been planning to roll out the new program for years, it has not publicly released many of the details of the 2.0 risk rating.

In fact, the program’s rating engine system (a database to support insurance agents who sell the program) went brutally online on September 1. program for insured persons.

Lepore, who has been following the process closely, found himself stunned, faced with the enormity of these rate hikes.

Lepore cites a policy quote given to a potential new client based in Belle Harbor who just weeks ago was assigned a preferred risk policy of $ 700.

For various reasons, the client chose not to purchase the policy immediately, but returned to Lepore later to find that the cost of the policy had increased to $ 4,000 per year (the policy became effective after the date of October 1st).

As existing policies can be capped at an 18% increase, new policies will experience a much different situation, as was the case in the above example.
Robert Intelisano, author of The Wave’s weekly column, The Financial Wave, also added, “Premiums could climb 60% over the next 3-4 years. This applies to those who already have flood insurance or buy a home with an existing flood insurance policy. First-time buyers are preparing to undergo a serious “sticker shock!” ”

This “sticker shock” is likely a deterrent for a buyer to consider a home in a high risk area such as Rockaway. In an effort to sell homes, homeowners may have to lower the price of their homes significantly to offset the high costs of flood insurance.

Civic Leader Dan Mundy, Jr., who strongly opposed the program, said: “It’s unfair, the federal government has reaped the tax benefits from coastal communities, single-family homes are the backbone of all. tax revenues. Homeowners will see their home equity stolen overnight, it’s financial disaster on the way for homeowners.

The Wave also asked our elected officials for their comments on the matter, MP Stacey Pheffer Amato said: “Flood insurance in a coastal community is obviously an important part of life and should be that simple. and consistent as possible… It is clear that we need to do more work, and I look forward to resuming these efforts to remove any mystery and misery for the owners of this process. ”
At the state level, members of the US Senate wrote a letter on September 22 to FEMA Administrator Deanne Criswell urging FEMA to delay the new NFIP rating system. Notable signatures on this letter included Senators Chuck Schumer, Kirsten Gillibrand and Cory Booker.

In the letter, the senators are “considerably disturbed by the information according to which nearly 80% of the insured will see their premiums increase nationwide”. This percentage is significantly higher than what FEMA has promoted as “66% will see an increase of less than $ 120 per year.”

The letter goes on to say “approximately 900,000 policyholders or nearly 20% of all policyholders will drop out of the program over the next 10 years, largely due to unaffordable premiums under the 2.0 risk rating.”

Note: FEMA will hold a press conference on September 24 to announce updates on flood insurance, which The Wave is scheduled to attend.