Hurricane Sandy Reveals Years-Long Insurance Overcharging

By STEPHANIE ZIMMERMANN
THE ABC NEWS FIXER

January 29, 2014

Dear ABC News Fixer: We have had flood insurance for our primary and only home on the Jersey Shore since 2003. We've been with Allstate since 2005.

We were flooded from Hurricane Sandy and our claim is done. Recently, we received a revised flood policy declaration page from Allstate stating that our premium is going down substantially due to a building description correction on our policy.

They changed the description of our home to "elevated with crawlspace." I am pleased the flood insurance is going down, but it seems we were overcharged for flood insurance for eight years.

We are being refunded approximately $980 for 2013, but what about the past years?

I contacted Allstate yesterday and my local office said that FEMA does not issue refunds for the past. My wife read your recent article where you helped out a family with obtaining an insurance refund for a misclassification, and I am hoping we can get some help, too. Nine hundred dollars a year for eight years is a lot of money.

- Kevin Kenny, Long Branch, N.J.

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Dear Kevin: You're not kidding, that's a lot of money – and the good news is we were able to get a good chunk of it back.

You told the ABC News Fixer that after you rebuilt because of Hurricane Sandy, your home was inspected. That's when you found out it should have been listed as elevated with a crawlspace, not an enclosure. This change caused your premium to drop from $2,690 to $1,707 and prompted Allstate to refund you $983 for 2013's overpayment.

To try to find the other years' refunds, we first went to FEMA, which oversees the National Flood Insurance Program. They sent us back to Allstate, which was able to issue an $840 refund for 2012. Anything earlier, they said, would have to come from FEMA.

So back we went. Allstate submitted your request to FEMA, and about a month later you got two more years' worth of refunds, for 2011 and 2010, totaling $1,502.

But what about the years before 2010? FEMA's own rules say they can make refunds going back six years.

Again we went to FEMA, where we got an answer: Under the old rules, your rate would have been the same regardless of whether your home was listed as with a crawlspace versus an enclosure, said FEMA Press Secretary Dan Watson. Those descriptions – and their rates – were differentiated in late 2009 on renewals beginning in 2010. So 2010 is the earliest point at which you qualified for a refund.

Allstate spokeswoman April Eaton said policies are rated under federal regulations and are based on info they get from policyholders and agents -- and they don't know where the original mistake occurred. The insurer made the correction as soon as they got the correct information, Eaton said.

Your experience prompts us to remind all homeowners to make sure their home is properly classified for flood insurance. If you think you're overpaying, contact your agent and provide documentation.

It's also a good idea to do a yearly check-up on all your home insurance coverage – especially if you've remodeled and increased the value of your home.

Meanwhile, many areas around the country are getting updated flood maps, which will affect insurance requirements and prices. Homeowners can search www.floodsmart.gov for local updates.

- The ABC News Fixer