Surprise! Flood insurance still a mess, so rates are going up again

John Romano

Times Colmunist

Wednesday

March 30th, 2016

Two years later, the flood insurance frenzy has died down. No one is shouting about inexplicable rate hikes or a real estate apocalypse. Private insurers are slowly entering the marketplace, and FEMA is keeping a low profile.

If you were the optimistic sort, you might even suggest the problem was solved.

And you would be dead wrong.

Starting Friday, the National Flood Insurance Program will embark on another round of rate increases. For primary home­owners in high-risk zones, experts expect the average increase to be in the 9 percent range. For businesses, the increase will be even higher.

Sadly, this isn't unexpected. In some ways, it may have been inevitable.

The flood insurance market has been heading in this direction ever since Katrina devastated the Gulf Coast, Sandy took on the East Coast, and FEMA found its coffers about $23 billion underwater.

For all the talk of private insurers, grandfathered policies and updated maps, the solution was always going to involve higher rate increases.

Congress may have thrown out roadblocks to keep FEMA from gouging unsuspecting homeowners all at once, but the bill would eventually come due, year after year and increase after increase.

State Sen. Jeff Brandes, R-St. Petersburg, got legislation passed a couple of years ago that eliminated some regulations and made it easier for private insurers to compete with the NFIP. And U.S. Rep. Dennis Ross, a Lakeland Republican, has pending legislation in Congress that would make mortgage lenders more amenable to dealing with private insurers.

That helps the problem, but it doesn't solve it.

Most private insurers are only interested in writing policies for homes in low-risk areas. That might keep those rates competitive, but it doesn't stop the most expensive policies from creeping into the stratosphere.

Making things worse is FEMA's continued obstinance when it comes to providing maps and rate calculations. Since the NFIP has essentially cornered the market for decades, private insurers need to see its records to better calculate rates.

For more than a year Florida Insurance Commissioner Kevin McCarty has asked FEMA to open its books, and the agency has refused.

If you're looking for an explanation, FEMA officials have been mostly mum. Which might lead one to believe the agency is calculating rates with faulty and incomplete data.

That seems to be the interpretation of a flood insurance company that recently opened in Tampa. TypTap, which is a subsidiary of Homeowners Choice Property & Casualty, may be the only private insurer in the state targeting high-risk flood zones.

The company's website provides instant rate quotes that seem to be going in the opposite direction of the NFIP. The company's rationale is McCarty's contention that Florida has been a donor state for flood insurance. Florida policy holders have received only 28 cents for every dollar paid in rates since 1978.

"We are not restrained by past experiences, such as Katrina or Sandy,'' said Kevin Mitchell, vice president of investor relations for TypTap's parent company. "We're able to offer a rate we feel is fair for the overall market in Florida.''

Maybe TypTap is too aggressive. Maybe other insurers are too timid. The only thing for sure is Florida homeowners don't have a lot of options.