Insurance costs to soar for those living in flood plains

By Lisa Hagen and Alex Hyacinthe

The Boston University Statehouse Program

BOSTON -- Massachusetts is being swamped with horror stories of skyrocketing insurance premiums for homes on the water's edge and, more recently, in adjacent areas once considered safe from flooding.

State legislators and the state's congressional delegation say they are hearing of rates jumping by as much 1,000 percent, driven by changes in a federal insurance program and by data suggesting that more properties are at risk from rising ocean levels and climate change.

State Rep. James Cantwell, a Marshfield Democrat, says he has heard of premiums increasing as much as $60,000 per year. Other lawmakers have similar stories.

"The highest one I've seen was $60,000," said U.S. Rep. Stephen Lynch, a Massachusetts Democrat. "The house was only worth $250,000. In roughly four years, you've basically paid for your house."

House Speaker Robert DeLeo, a Democrat from Winthrop, tells of a homeowner who saw his insurance payment go from $3,000 to $68,000 a year.

"My major concern is that if costs are rising in that manner, people will lose their homes," DeLeo said in a telephone interview.

Such examples are extreme, according to Bob Desaulniers, a New England Federal Emergency Management Agency insurance specialist. He said most property owners in or near flood plains can expect about a 25 percent increase -- an average of a couple hundred dollars -- in yearly premiums.

Program changes

One reason for the increase is a change in the National Flood Insurance Program, the insurer of last resort for some 60,185 policyholders in Massachusetts.

Until last year, the 45-year-old program offered subsidized insurance for owners of at-risk properties. But a string of losses from major storms, such as Superstorm Sandy and Hurricane Katrina, drove the program into a $25 billion deficit.

In response, Congress passed the 2012 Biggert-Waters Act, which requires the program to raise rates to more realistically reflect risk. It also requires FEMA to remap flood plains to account for rising sea levels and an increase in severe storms.

Some of those increases, which began Oct. 1, are having a profound effect on real estate.

Paul Breen, a Provincetown insurance agent, tells of the sale of a multimillion-dollar property that fell through because premiums were set to jump from $4,000 to $42,000.

"That was for the base $250,000 worth of flood insurance offered by FEMA," he said.

Breen said additional private flood coverage was going to cost the buyers an additional $35,000.

"Their combined flood-insurance premium was going to be almost $80,000 a year," he said. "So they chose not to buy that property."

Coastal municipalities have been hit hard by the insurance tsunami, according to preliminary data from Colleen Bailey, a mapping coordinator for the state Department of Conservation and Recreation.

From 2012 to 2013, Quincy saw nearly 1,300 structures added to the flood-hazard area. Marshfield saw an increase of more than 1,500 structures. Nearly 500 properties were added in Scituate.

Desaulniers said two types of properties are most vulnerable to extreme rate increases -- older homes that predate earlier flood mapping, and homes that suffer repetitive losses.

"There shouldn't be any wild, crazy jumps," he said, "But a higher percentage of homes in New England are older."

Further increases are on the way. Biggert-Waters allows owners of older homes to keep their lower premiums. But if the property is sold, higher rates will apply.

"The problem is that it's a double whammy," Breen said.

State and federal lawmakers are looking for ways to alleviate the pain for homeowners.

Cantwell, the Marshfield state representative, thinks it would be fairer to shift some burden to homes that have suffered repetitive losses.

"One percent of national flood policies account for 33 percent of all claims," he said. 

Cantwell has also challenged FEMA mapping data, noting that 40 percent of the structures in Marshfield added to the flood zone never needed flood insurance before. Marshfield, Scituate and Duxbury have appealed FEMA's new maps.

According to Cantwell, U.S. Rep. Bill Keating, a Massachusetts Democrat, recruited a group from UMass Dartmouth to review the maps, charging that the FEMA maps used the wrong wave model.

"They used a model for the Pacific coasts, which are different from the Atlantic," Cantwell said. "Our waves come up gradually, and our coastline is very shallow, where the West Coast is much deeper."

Towns can appeal FEMA mapping to a scientific panel that can provide feedback. Cantwell said if towns are still unsatisfied, they can sue at the U.S. District Court.

"(I have) concerns that insurance companies (are) charging exorbitant costs without proper science behind it," Cantwell said.

Bipartisan bill

Lynch has joined more than 100 members of Congress working on the Flood Insurance Affordability Act, a bipartisan bill that would help ease the transition.

"What we're trying to do is require that FEMA conduct the affordability studies first and also make sure that their remapping technology and the process itself is consistent with the historical record," Lynch said.

Speaker DeLeo filed a bill last month with Attorney General Martha Coakley and Cantwell that would allow homeowners to limit insurance coverage to the amount they still owe on their mortgages.

"It is a risk they would take as to whether a particular situation really needs extra insurance, but they are not required to get it," he said.