Three in four Long Island homeowners insured under the National Flood Insurance Program will see their premiums rise next year, while a smaller contingent will see their annual bill cut by $1,200 or more.
The changes represent a dramatic overhaul of the decades-old system for assessing flood risk, which relied on flood zone maps created in the 1970s. The new system, called Risk Rating 2.0, aims to tailor insurance prices to each property, factoring in flood frequency, proximity to water, elevation and the cost to rebuild.
The adjusted premiums went into effect Oct. 1 for new policyholders. Homeowners with existing coverage won’t face higher costs until their next renewal, effective April 1. Property owners with homes deemed a lower flood risk can take advantage of discounts immediately, according to FEMA.
The shift could usher in years of 18% premium increases for some Long Island homeowners, the maximum amount allowed by law for most homes, as the federal program phases in new rates that are, in some cases, five to 10 times higher than historical rates, according to quotes generated by David Clausen, CEO of Coastal Insurance Solutions in Rocky Point, at Newsday's request.
Clausen generated quotes for about a dozen randomly selected homes across Long Island for Newsday with startling results that varied widely.
One home in Oakdale, which currently pays $880 a year through the federal program, will face a $4,383 annual premium under the new rating system. The homeowner won't experience that change in a single year, thanks to the 18% cap on annual increases for primary residences. But the policyholder would face those 18% increases year after year for about a decade until the price fully accounts for the home's risk.
Meanwhile, another quote generated by Coastal Insurance Solutions showed a different Oakdale home will see its premium fall from $3,449 to $1,620 under Risk Rating 2.0.
"Some people won't be impacted at all and some will be impacted more than they expect," Clausen said. "It's so tough to tell."
A home in Hampton Bays received a quote that's nearly 10 times its current $572 premium. Another in Island Park will see an increase from $600 to $4,505 over time. One in Babylon would see its rate eventually increase to $8,701 a year from $2,322. A Lindenhurst property's coverage would cost $10,134, up from $1,199, according to Clausen's data.
"There’s a chance we got unlucky of course, but the trend is not promising," he said of the random quotes that were selected.
Flood insurance rates by ZIP Code
This map and the table below it show how flood insurance rates will change under a new system for determining premiums. The darker areas have higher percentages of homes projected to see premium increases under the National Flood Insurance Program.
The data are projections from FEMA on how premiums are likely to change based on policyholder information in May 2020. New information provided by homeowners or changes in their coverage or deductible selections could also affect their premiums.
In factoring in property values, the Federal Emergency Management Agency hopes to more fairly distribute price increases and avoid low-income homeowners subsidizing the flood risk of waterfront vacation homes. In Nassau County, 25.5% of homeowners covered under the federal program will pay less each month and 74.5% will pay more. In Suffolk, 23.9% will pay less and 76.1% will pay more.
"We cannot continue to ignore our policyholders who have been unjustly subsidizing other policyholders," David Maurstad, senior executive of FEMA’s National Flood Insurance Program, said in an interview Thursday. "Lower value or lower-risk homes are paying more than they should, and policyholders with higher value or higher risk homes are paying less than they should."
FEMA has emphasized that most homeowners won't see their bill increase by more than $10 a month, or $120 a year. But high-risk properties could face 18% increases year after year until they reach their newly assessed rate. Even after a decade of facing the maximum increase, 10% of homes will still not have reached their full risk rate.
Maurstad said the increases aren't new to Risk Rating 2.0. Many of the same homes would have faced higher prices under the traditional system, and homes that will see their rates multiply were clearly mispriced, he said.
"They were increasing on the wrong policyholders, and that's what people ought to be focusing on," Maurstad said. "What that illustrates is ... the zone system, the antiquated system we used in the past, in essence was misrating these properties and not just by a little bit."
A FEMA spokeswoman said Friday the sample prices provided to Newsday "are not representative of the quotes being given in Long Island." She said the average of new quotes on Long Island is $1,600, with more than half of policies costing less than $1,000. Only 5% will cost $5,000 or more, while one-third of Newsday’s random sample reached that threshold.
The majority of homeowners across Long Island will see their 2022 bill increase by $120 a year or less, while a small percentage — 5.5% in Nassau and 8% in Suffolk — face increases of at least $240 a year, or $20 a month.
A group of about 9% of policyholders in the federal program will see a dramatic price cut of $1,200 a year in recognition that they’re currently paying far too much for coverage given their properties’ flood risk.
One property in Westhampton Beach with an $8,577 premium will see that cut by more than half to $3,659 under the new system. That discount could go into effect upon renewal.
The average flood insurance premium for the 77,000 federal policies on Long Island, including those for commercial properties, is $1,291, according to FEMA data. The maximum premium under Risk Rating 2.0 is $12,125.
Long Islanders can find their new rates by requesting the information from their insurance agents. FEMA's data does not provide information on individual properties, which it says is to protect homeowners' privacy.
"If I have flood insurance, I would be calling my agent today," said Laura Lightbody, who directs The Pew Charitable Trusts’ flood-prepared communities initiative. Lightbody has been supportive of the federal changes, which she said better align flood insurance costs with risk. She noted that if the status quo had remained, all 5 million policyholders nationwide would have paid more next year, while under the new system, almost 1.2 million properties will get a discount.
The new system prices coverage based on the cost to repair or replace a property, which takes into account areas such as Long Island, where building is pricier.
"It’s a more granular way of looking at risk that will ultimately fix a longstanding imbalance," Lightbody said.
The new system will yield more precise results than flood zones. For example, a house on the South Shore of Long Island that sits on the northern edge of the highest-risk flood zone could see premiums fall, while the house closest to the water in a zone that had been labeled lower risk might pay more, depending on other factors including the house’s elevation and flood history.
The new rates speak to a broader question facing Congress as it debates the future of the National Flood Insurance Program. How should the federal government distribute the costs of rebuilding after storms, especially as climate change increases the intensity of those storms, and what is its responsibility to keep insurance rates affordable for people living on the water’s edge?
"The program as it was created, and as it has been run since the 1970s, just can't keep up with the current environmental risks occurring in lots of places," said Jeremy Porter, head of research and development at the First Street Foundation in Brooklyn, which conducts research on climate risk. "NFIP, as it stood, could not keep up with the payouts it was having to make for all the federally-declared disasters."
The new pricing system is part of a set of reforms that FEMA hopes will move the National Flood Insurance Program toward long-term financial sustainability. Major storms over the past decade led the NFIP to borrow from the U.S. Treasury to pay claims, but even after President Donald Trump signed a bill to cancel $16 billion in debt in October 2017, the program still owed $20.5 billion as of January.
"If it was a real insurance company, they would have gone out of business many years ago or had to have had a rate increase," Clausen said.
Clausen noted that consumers will have the option to renew at their existing rate or the 2.0 rate until April 1. If they’re faced with a higher rate under the new system, homeowners can explore the private insurance market to see if a non-government carrier might offer a better rate. FEMA also advises that elevating a property or mechanical equipment could also lead to lower premiums.
"It’s wise for consumers to check every option," he said.
For a significant majority of Long Island homeowners insured under the federal program, their premiums next year will remain within $20 a month, or $240 a year, of their current rate. In Nassau next year, about 76% of homeowners will have between a $240 decrease and a $240 increase. In Suffolk, 80% fall within that range.
The areas with the largest number of policyholders who will face the most expensive premium increases of $240 or more are in ZIP code 11758, which includes Massapequa and Jones Beach Island. In that area 483 policyholders will pay at least $240 more, including 19 who will pay at least $600 more, the highest number statewide.
Next are Long Beach with 427 policyholders paying at least $240 more, Babylon with 299 policyholders, Lindenhurst with 272 and Amityville with 218.
South Shore communities across the Island make up the bulk of the areas seeing the highest number of increases.
Some of the same areas are home to residents who will see their premiums fall because of the new system. In Nassau, 18.7% of residents will see rates drop by at least $240, while 12.4% of people will get that discount in Suffolk.
In Long Beach, 1,719 single-family homes will get a discount followed by 1,149 homes in Freeport, 707 homes in Woodmere, 668 homes in Massapequa and 535 homes in Oceanside.
In some areas where fewer homes are required to buy insurance through the federal program, a high percentage of homes will see decreases. In Commack, 40 of the 46 residents with federal policies will see a decrease.
A select group — 9.9% in Nassau and 8% in Suffolk — will see a price drop of $1,200 or more a year.
One factor that’s driving savings is that FEMA will now use a different method to calculate elevation.
"That was a good move and is a way to show some savings to people," said Denis Miller, who runs an insurance agency in Long Beach.
Miller said he has written several hundred new policies since Risk Rating 2.0 took effect last month. He said the quotes he’s seen for properties have seemed somewhat random and he’s still working to understand how the National Flood Insurance Program will assess risk under the new system. One of his customers in Long Beach saved $1,500 a year under the new quote but others will pay more.
"There are people who will get rate increases and there’s no way to satisfy everyone," Miller said.
Under the new FEMA system, households won’t need to provide an elevation certificate to purchase coverage. But providing one to an insurance agent to see if it will lower insurance costs could be worthwhile, said Shawn Fitzgerald, owner of insurance agency LAF Advisers in Melville. The certificates are sometimes included when a deed is transferred. Homeowners can receive a new elevation certificate from a land surveyor, Fitzgerald said.
"A few hundred dollars in savings [on annual premiums] adds up quick," he said.
What remains the same
Several aspects of the federal flood insurance program will remain the same under risk rating 2.0. FEMA will still use its Flood Insurance Rate Maps to determine who is required to buy flood insurance. FEMA will also continue to offer discounts to homeowners whose properties were built before flood maps were created for that area, which is Dec. 31, 1974 for many homes.
Homebuyers can also seek to preserve those discounts by having a seller transfer their flood policy to the buyer during the sale process.
Higher flood insurance costs add to the cost of buying a home on Long Island. If a buyer is already nearing what they are willing to pay for a home, "a couple extra hundred a month could throw them out of what they can afford," said Angela Prince, a real estate broker who owns Prince & Associates Realty Group in Bay Shore.
Plenty of unknowns
Susan Goldstone understands the devastating power of floods. Nine years after superstorm Sandy struck Long Island, she still has not been able to return to her Oceanside home, which sits a few houses away from a creek. During the storm it filled with five to eight feet of water, and Goldstone was required raise the property to prevent future flood damage.
But about four years ago her contractor walked off the job. In October, she met with 15 contractors to see if they would finish the work, but none agreed or even gave her a detailed quote of what it might cost. In the years since the storm, her flood insurance has increased from $345 a year to more than $800. Goldstone is hopeful raising her house will drive down her future flood insurance costs, but she hasn’t received quotes on her new rate under Risk Rating 2.0
"If you lifted it, it should go down, but it won’t kick in until we have that CO and we’re back in the home," Goldstone said, referencing the certificate of occupancy she needs to move back in.
Maurstead, the FEMA executive, said elevation is an important factor in calculating rates.
"I applaud them," Maurstead said of people who raised their homes, "because they made their property safer for their families to live in."
Some advocates think FEMA should have waited to implement the new rates. There is little clarity into the exact method the federal program is using to determine individual homeowners’ premiums, said Michele Insinga, a Lindenhurst resident and executive director of nonprofit Adopt a House, which formed to help flood victims after superstorm Sandy.
Insinga has worked with lawmakers including Sen. Chuck Schumer and Reps. Kathleen Rice and Andrew Garbarino to delay Risk Rating 2.0, including in letters to Congress in September, but the changes still took effect Oct. 1.
Insinga worries that factors such as the cost of rebuilding on Long Island and its proximity to the coast will be too heavily weighted while the risk of flooding because of heavy rain won’t be reflected enough. She is also concerned homeowners could face years of 18% increases on their flood insurance under Risk Rating 2.0.
"There’s too many problems with this," Insinga said of FEMA's plans. "We don’t trust them because have they given us reason to? No. They underpaid Sandy claims to start with."
Elizabeth Treston, an advocate for residents after superstorm Sandy and a Long Beach city councilwoman, said she worries that Long Islanders aren’t prepared for their premiums to change when they renew their coverage next year.
"No one knows it’s coming," she said.
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