Flood insurance rates set to rise for many NEPA homeowners [The Citizens' Voice, Wilkes-Barre, Pa.]

Apr. 24—Mary Jordan worries her flood insurance might rise because of a new federal pricing system.

Under the Federal Emergency Management Agency's new rate system, flood insurance rates for 85% of policyholders in Northeast Pennsylvania will increase, while 15% will see premiums decrease.

Jordan already pays about $500 annually for the flood insurance on her Mayfield home on Maple Street. Her policy does not renew until later this year. Not knowing if she faces a rate hike makes it difficult to plan financially.

"It's frustrating," Jordan said. "It's already expensive. ... It's like another mortgage payment."

The revised rate structure, known as Risk Rating 2.0, went into effect in October for new policies and on April 1 for existing policies. It dramatically alters how policies are priced.

Under the old method, rates were primarily based on a property's elevation within a flood zone in FEMA's Flood Insurance Rate Map. The new rates are based on specific characteristics of each home.

Key factors that affect premiums include the cost to replace the home, its elevation, its distance from a water source and type of potential flooding.

Officials say the new rating system is fairer, ensuring property owners' rates are based on their home value and a more accurate assessment of their risk of flooding.

It's expected to benefit owners of lower-valued homes, while those with more expensive properties or in high-risk flooding areas likely will see substantial increases.

"You are being assessed on the individual property risk, not a community risk," said Mark Friedlander, spokesman for the Insurance Information Institute, a New York City-based nonprofit that educates consumers about insurance. "In the past, lower-value homes were paying a disproportionate share. That's not the case anymore."

Nick VinZant, a researcher with quotewizard.com, an online insurance marketplace, likened the situation to how premiums are calculated for auto or health insurance.

"If you have a lot of tickets, you pay more," he said. "If you are a smoker, your health insurance costs more."

The average flood insurance policy in Pennsylvania cost $1,326 a year, according to quotewizard.com. Statewide, 70% of policies are projected to increase from $120 to $1,200 a year under the new rating system, with 30% decreasing within the same range, according to FEMA.

Luzerne County has the largest percentage locally of properties facing a price hike, 87%. About 13% will decrease. In Lackawanna County, 82% of properties will see rates increase, while 18% will see a decrease.

In other local counties: 86% of properties face an increase in both Wyoming and Susquehanna counties while 14% will decrease; 78% will increase in Pike County while 22% will drop; and 70% will rise in Wayne County while 30% will decrease. Rates for most properties will increase no more than $120 to $240 in the first year. That's the case for 73% of the 912 policies in Lackawanna. For a handful of others, the increase will be more substantial, with 25 properties increasing by $600 or more, including three facing a $1,200 hike.

In Luzerne County, 82% of the 5,829 policies will increase no more than $120 to $240, while 59 will increase by $600 or more, including three that will rise by $1,200 or more.

The increases are in the first year only. However, some properties will continue to see increases in subsequent years, said Brett Hewitt, vice president of federal and government relations for the American Property Casualty Insurance Association, a Chicago-based insurance industry trade group. Higher-value properties and those in high-risk flood zones could see substantial increases over the years.

Under the new system, properties are assigned a "true risk premium" that FEMA says reflects the actual cost to insure the property, Hewitt said. If the true risk premium is lower than what the owner currently pays, the premium drops; if it's higher, it rises.

For policyholders facing increases, there is some good news: the government caps the amount a policy can increase to 18% annually for most properties. For second homes and businesses, the cap is 25% annually.

A property owner with $1,000 premium and a true risk premium of $2,400 would pay no more than $180 additionally the first year. The rate would climb by 18% each year, until it reaches the $2,400. FEMA estimates most properties will reach the true risk premium within five years.

"You could see people go up by a couple of hundred dollars. It's just going to take a couple of years to get there," Hewitt said.

Scranton Mayor Paige Gebhardt Cognetti said she worries about how this will affect lower-income property owners.

"So many of our residents have fixed incomes," she said. "We are looking to see if there are any programs to mitigate the cost."

U.S. Rep. Matt Cartwright, D-8, Moosic, shares her concern. He introduced a bill in late March that would discount premiums for low-income households. Called the National Flood Insurance Program Affordability Act, the bill would limit the premium to no more than 1% of the median income where the property is located. It also would require FEMA to accept installment payments. Policies now must be paid in full at renewal.

Friedlander encourages homeowners concerned about the rising cost to shop prices with private insurance agencies.

The National Flood Insurance Program (NFIP), established in 1968, has been the primary provider of flood insurance. In recent years, many private companies have begun to offer policies. The private policies can provide a higher level of property and contents coverage and can take effect much faster than the 30-day waiting period for the NFIP, he said.

"There are dozens of insurers who write private coverage," he said. "Just like auto insurance, you should shop around."

Contact the writer: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter.

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