Today I met with some fine people at Brown & Brown Insurance to learn more details about how these flood rate changes are being affected. It seems that as the days go on, more and more information comes out about how exactly the flood insurance rate changes are going to work, what is transferable, grandfathering, etc. And because I do not have a transcript of our conversation, I will just do this in note form…
- Grandfathering vs. Subsidized Rates – From my conversation, these two terms are being used interchangeably, but they are actually quite different. Grandfathering is for post-FIRM buildings, or homes built after the flood maps were in place. This allows insurers to keep the same rates in place when transferred from owner-to-owner. Pre-FIRM properties, or those built to code before maps were in place, are said to have subsidized rates and are not considered grandfathered (they were only transferable). Therefore, under the new law passed a few weeks ago these policies can be transferred again, but they can’t be grandfathered upon renewal. If the pre-FIRM policy was done with an elevation certificate, the policy is transferrable to a new owner but only until the next renewal, thereupon the new rate increases will take affect. Phew!
- Rate increases – My conversation led me to believe that eventually all policies will start to see rate increases as soon as this year. However, the increases should be in line with normal homeowner insurance premiums, between 5%-15%. Ideally they should align to about 1% of the home’s value at first, and then rise each year. They key here is that the mandatory 25% rate increase is NO LONGER in effect, but rather a more gradual increase to allow for price adjustments and affordability to be measured.
There are still many things that are still being sorted out about this flood insurance business, and as new information comes out i will be the first to let you know. My personal opinion after letting it all sink in is that the bill may have helped a lot of people in the short-term but ultimately it will have a significant affect on the affordability or “sell-ability” of houses in the future. Rather than a quick punch in the gut, it’ll probably be more like a bunch of pin pricks.