Flood insurance premiums to soar in Pa. because of change in pricing formula

Her $880 bill could skyrocket to $5,137 in the coming years for the Chittenden Street home near the Lackawanna River bank in Luzerne County.

"I have to see if I can pay it this year," said Yachna, who lives there with her 56-year-old disabled son, James. "If not, I don't know what I'm going to do."

She is among millions of homeowners nationwide insured through the National Flood Insurance Program who face dramatic premium spikes under a revised rating system the Federal Emergency Management Agency, the program's manager, began implementing in 2021. It is the first major update to the pricing system in more than 50 years. Many are unaware of exactly how much their bills will rise, and experts worry the hikes will cause many to drop their insurance and risk costly consequences.

FEMA analyzed flood insurance costs for 2.2 million single family homes nationwide, including 21,928 in Pennsylvania, whose rates were calculated under the revised rating system as of Sept. 30. It does not include commercial properties.

The analysis projects how much average premiums will increase by state, counties and ZIP codes.

In Pennsylvania, projections show a 92% hike, from $1,075 to $2,060; nationwide, it's a 124% increase from $808 to $1,808. In Northeast Pennsylvania, the average premium more than triples in Lackawanna and Wyoming counties, more than doubles in Luzerne, Pike, Susquehanna and Wayne counties and nearly doubles in Schuylkill County.

The Noxen area, ZIP code 18636, in Wyoming County, and the Duryea area, ZIP code 18642, in Luzerne County, face the largest percentage increases statewide. Projections show the average premium in the Noxen area will skyrocket 677%, from $750 to $5,829, and 673% in the Duryea area, from $705 to $5,448.In Lackawanna, average rate projections show:

—Archbald, ZIP code 18403,up 409%, from $736 to $3,747;—The Jermyn/Mayfield area, ZIP code 18433, up 376%, from $1,036 to $4,929;—The North Scranton area, ZIP code 18508, up 335%, from $771 to $3,351.—The Dunmore/Throop area, ZIP code 18512, up 327%, from $845 to $3,611.In Luzerne:

—The Pittson/Jenkins Twp. area, ZIP code 18640, up 274%, from $916 to $3,428.—The Kingston/Forty Fort/Edwardsville area, ZIP code 18704, up 120% from $695 to $1,532.—Wilkes-Barre, ZIP code 18702, up 115%, from $805 to $1,731.—The West Pittston/Exeter area, ZIP code 18643, up 114%, from $969 to $2,070.—Nanticoke, ZIP code 18634, up 93% from $1,396 to $2,701.tncms-asset)f5178cde-12d5-11ee-9a69-00163ec2aa77[2](/tncms-asset)

It is unclear why Yachna's rate will increase so much. It may be tied to her home being so close to a river and being flooded by tropical storms — Agnes in 1972 and Lee in 2011.

Duryea built a steel wall that elevated the height of the levee behind her home after the 2011 flood. But FEMA no longer offers preferred risk policies — lower-cost flood insurance policies for properties in moderate- to low-risk areas.

Yachna doesn't want to drop her coverage because her home flooded twice, but may have no choice

"It's getting tough," she said. "The gas is going up. The electric is going up. The water is going up."

Some local officials criticized FEMA's new rating system as potentially pricing out many homeowners from the market, like Yachna and those with low to moderate incomes.

"These premium increases are outrageous, and it's the people who can least afford them who are being forced to pay," U.S. Rep. Matt Cartwright said in a statement. "Flood insurance has to be affordable, even to those with low and fixed incomes."

Wyoming County Commissioner Chairman Richard Wilbur said he suspects FEMA is trying to drive people out of the market "so they don't have to pay any money out because no one could (afford to) live in a flood zone anymore."

"A lot of people are going to lose their homes over it," Wilbur said. "How can you afford $4,000 to $5,000 for flood insurance? That's going to add $400 a month on top of the other bills."

A FEMA spokesperson said in a statement the agency realizes the rate hikes are concerning, but it is mandated to charge actuarially sound rates and does not have the authority to consider affordability in setting those rates.

Bob Pitcavage, 67, of Eaton Twp., recently learned the flood insurance premium for his Dymond Terrace home along the Susquehanna River will jump about 52%, from $2,673 to $4,063.Retired, he and his wife Paula, 66, live on a fixed income. Their home flooded in 2011. He now fears they may have to drop the insurance.

"We are keeping it for as long as we can afford it, but as we get older, it's going to be more difficult every year," he said. "At some point we may just have to roll the dice because it's cost-prohibitive."

He also worries about how the new flood insurance rates will affect their chances of selling their home if they ever decide to put it on the market.

"You are basically trapped here," he said. "The bank is going to require insurance. People won't be able to afford the mortgage and flood insurance."

Here is everything you need to know about the changed rating system:

Why is my rate increasing?

The hikes stem from FEMA's new rating structure, known as Risk Rating 2.0. Premiums are now based on each property's individual flood risk, including elevation, distance from a water source, flood history, type of potential flooding and cost to rebuild the home.

Properties now are assigned a "full-risk premium" that FEMA says more accurately reflects costs associated with the risk to insure the properties.

Previously, properties were placed in a general risk category and evaluated by location within a flood zone on a Flood Insurance Rate Map (FIRM), occupancy type and elevation within a flood zone. That rating system did not take into account the individual flood risk or cost to rebuild, and considered just two sources of flood risk — river flooding and coastal flooding.

How much can my premium increase annually?

By law, increases for most residential properties with existing policies are capped at 18% a year and 25% for commercial properties. Premiums phase in, increasing by 18% each year (25% for commercial properties) until they reach the full-risk rate.

How long will it take to reach the full-risk premium?

On average, FEMA data shows Luzerne County policies will be at full risk in six years; Lackawanna, eight; Schuylkill, five; Wyoming, nine; and Pike, Susquehanna and Wayne counties, seven years. Nationwide, FEMA estimates 50% of properties will be at full risk between fiscal year 2025 and 2026, and 90% by fiscal year 2033. As of May, 34% of residential policy holders were already paying the full risk premiums.

When did the new rate changes take effect?

In October 2021, for new policies and April 2022, for existing policies.

Why did FEMA change the rating system?

To more accurately reflect the risk, and the agency's financial liability.

The National Flood Insurance Program (NFIP) sustained massive losses from catastrophic weather events, including Hurricane Katrina's devastation of New Orleans in 2005. As of last year, the NFIP owed the treasury $20.5 billion."It was a failing model because they are not charging enough for the risk," said Mark Friedlander, spokesman for the New York City-based nonprofit Insurance Information Institute. "As a result, they have continually lost money. ... It's not a sustainable model and it is costing taxpayers who will be indebted to bail out the program time and time again."

The change also makes the system more equitable. If your home's value is less than your neighbor's, your replacement cost is less and your premium should be too, Friedlander said.

"In the past, virtually everybody in the same neighborhood paid the same — regardless of what your replacement cost was," Friedlander said. "That is not a fair system."

How exactly is my rate calculated?

That largely remains a mystery. FEMA provides general information on factors it uses, but refuses to publicly disclose the algorithm used to calculate premiums. The Louisiana-based Coalition for Sustainable Flood Insurance has called upon the agency to be more forthcoming.

How many policy holders will see an increase?

FEMA estimates premiums for about 80% policies will rise, while 20% will decrease. The reduction only applies to the first year of the policy compared to the prior year.

What if I'm a first-time policy buyer?

First-time buyers must immediately pay the current full-risk premium rate.

Buyers seeking to purchase a property with an existing policy should consider assuming it so they qualify for the phase-in period, said Betsy Tribendis, a Realtor and president of Walters Associates, Inc., a Forty Fort insurance agency. "I tell agents to make sure you tell your clients that if the sellers have flood insurance that the buyer (needs to) takes over the policy to minimize the impact," she said.

Can I drop coverage?

It depends. Properties in high-risk flood zones with mortgages from government-backed lenders are required to have flood insurance. Many private lenders also require coverage in high-risk areas, but generally make it optional for homes in other flood zones. Property owners without a mortgage also do not have to carry flood insurance.

Experts urge existing policy holders to carefully consider the consequences of dropping coverage. Besides risking financial ruin should a flood hit, a policy holder who drops coverage and later wants to renew it would no longer qualify for the phase-in period that spreads out the full-risk premium increases annually.

Where do I find my full-risk premium?

Insurance companies that sell NFIP policies include the full-risk premium rate on the policy declaration page a policy holder receives after paying the premium.

However, the declaration page does not necessarily include an explanation of what the term means. Consumer advocates worry many people remain unaware of how much their policy will increase because of that.

"You might not even know what that full-risk rate line means and not recognize that eventually you are expected to pay that," said Peter Waggonner, a spokesman for the Coalition for Sustainable Flood Insurance.

Will the full-risk premium amount rise again?

The rates could increase further because of climate change causing more frequent and catastrophic weather events, said Carolyn Kousky, Ph.D., associate vice president for economics and policy for Environmental Defense

Fund. Is anything being done to help property owners?

Legislators in several states want the federal government to offer subsidies to help low- to moderate-income property owners pay premiums.

In Pennsylvania, Cartwright introduced legislation in March that would establish a means-tested assistance program for residential and small business policyholders. The bill would ensure premiums do not exceed 1% of the median income of the area in which the property is located. It also would allow policy holders to pay monthly installments instead of the lump sum payment now required.

Louisiana and nine other states also filed a federal lawsuit June 1 that seeks an injunction. The suit, which Pennsylvania has not joined, alleges, in part, that the rating system improperly considers hypothetical future risks.

I'm concerned about the new rating system. What can I do?

The Coalition for Sustainable Flood Insurance urges policy holders to contact state and federal legislators to express concerns about flood insurance rates. The Louisiana attorney general's office also developed an online form — at agjefflandry.com/FloodInsurance — that allows policy holders nationwide to share concerns and express interest in joining a potential class-action lawsuit.

What can I do to reduce my rate?

Ensure the information FEMA has about your property is accurate. Much of that data is highly technical, but other information, such as how many floors and the foundation type, is known.

Consider reducing the amount of coverage on the building or contents and/or increasing deductibles. Property owners not mandated by their lenders to carry flood insurance can drop contents coverage for a substantial savings.

Look into purchasing coverage from a private insurance company instead of the NFIP.

"There are more companies writing flood insurance in the market than ever before," Friedlander said. "Nobody can guarantee you will do better ... but a competitive market typically leads to better pricing."

Encourage your municipality to take steps to be included in the Community Rating System program, which offers premium discounts ranging from 5% to 45% for properties in communities that exceed NFIP flood plain requirements. Properties in Wilkes-Barre, West Pittston, Hanover Twp. and Kingston borough currently qualify for discounts ranging from 10% to 20%.Where can I get more information?

FEMA's website: fema.gov/flood-insurance.

Tips for paying less for flood insurance: floodsmart.gov/how-can-i-pay-less

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Contact the writer: [email protected]; 570-348-9137; @tmbeseckerTT on Twitter.

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