Majority of Michiganders see lower flood insurance rates as federal government adjusts pricing

My walls were crying.

That's what Latausha Robinson said. It was late June and the Detroit resident had just welcomed her son back home from college after COVID-19 closed his campus. Her son, and all of his belongings, were now in the basement of the family home.

Not long after 6-8 inches of water started seeping in the basement. It was the first time Robinson can recall having a problem with flooding, who has four drains in her basement.

Robinson, who is considering buying flood insurance, stopped by FEMA's disaster recovery center in Southfield Thursday to see if she could receive additional federal aid.

Statewide, 20,481 Michiganders have a with a combined $4 billion worth of flood insurance coverage through FEMA's National Flood Insurance Program (NFIP).

The 53-year-old program provides 90% of U.S. flood insurance policies and is delivered by a network of 60 insurance companies. It's undergoing major changes that will result in some policyholders seeing rate increases and some seeing decreases based on a wider range of data sources.

It wasn't long before she noticed mold on her walls and along the baseboards from all the moisture. She had that cleaned immediately, especially since one of her daughters has asthma.

"I have a lot of structural damage," she said. "I was initially approved for $500 in federal assistance and I appealed it because I have a lot more damage than that. A lot of stuff in my basement was destroyed. The water was leaking in. I got some repairs, but it needs a lot more."

Robinson joins the thousands of other Macomb, Oakland, and Wayne county residents seeking first-time flood assistance under the presidential disaster declaration as a result of the June 25-26 flooding events caused by heavy rainfall that moved through southeast Michigan.

Flood insurance, offered through the NFIP, covers direct physical losses caused by a flood that can cover buildings, the contents in a building, or both, and is generally required for mortgages on properties considered to have a roughly 1 in 100 chance each year of flooding, but is optional for everyone else. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP with communities agreeing to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.

FEMA officials said the changes are necessary to correct inequities entrenched in the program, which covers about 5 million policyholders nationwide. Flood insurance rates will now be calculated using the agency's Risk Rating 2.0 methodology, which is a longer list of factors that better reflect an individual property owner's flood risk.

Statewide, 9,361 current NFIP policyholders are projected to see increases in their monthly flood insurance rates while the remaining 11,120 policyholders are projected to see decreases in their flood insurance rates as a result of the methodology. According to FEMA data, the average amount of combined flood insurance coverage by Michigan community is around $4 million.

According to FEMA, 68% of Michigan's 1,773 communities are enrolled in the NFIP program including 52 in Oakland County, which has 1,349 active policyholders with a combined $350 million in flood insurance coverage. Federal data shows the City of Troy having the most coverage at $44.4 million spread across 143 policyholders.

Of those 1,349 active policyholders in Oakland County, 842 are projected to see monthly rate decreases while 507 are projected to see monthly rate increases under the new pricing structure, most between $1 and $10 per month. About 15 policyholders will see increases of more than $10 per month.

The increases will not take effect until after April 1, the agency said. But new flood insurance policies purchased through the NFIP will pay the new rates immediately. Existing policyholders whose policies renew before April 1 and whose premiums will decrease will be allowed to take advantage of the lower rates sooner.

Since the 1970s, flood insurance rates have been driven mostly by a property's proximity to a federally-approved floodplain and its elevation based on 100-year flood risk. Under the old pricing system, every policyholder would have seen rate increases now and into the future.

The new rates will be based on home value and the cost to rebuild along with a property's true flood risk including threat of extreme rainfall events, climate change, distance from a body of water, flood type, ground elevation, and other property-specific data like foundation/construction type and first floor height.

This will enable FEMA to provide more accurate pricing based on a property's individual characteristics and remove the requirement for a flood elevation certificate, which can cost up to $2,000, while making lower-valued properties less expensive to insure and preventing the premiums paid on these properties from subsidizing more expensive properties in riskier areas.

Matthew Occhipinti, Michigan's NFIP coordinator and a floodplain engineer for the Michigan Department of Environment, Great Lakes and Energy (EGLE), said the new pricing system will not affect how many homeowners, renters, or business owners are eligible for flood insurance.

"I think that FEMA has known for a long time that they needed to update the way that they calculate rates," he said. "For the relatively few number of people who will see increases in their flood insurance premiums, they're not going to jump the way they would have under the legacy pricing system. This new methodology takes more of a granular approach so your rate will depend on a lot of different factors, so site specific details are going to matter."

Although this is a major change in how FEMA calculates flood insurance rates, Occhipinti added this does not affect NFIP regulations, how floodplains are drawn, requirements for building in a floodplain, requirements for elevation certificates, and the annual rate increases that are capped by law at 18%.

Under the old pricing system, he said everyone's flood insurance rates would either increase or decrease.

"The new system takes other variables into account such as how far back you are from the water," he said. "In other words, under the old system you could have someone who was right next to the river who would be paying the same premiums as someone who was on the very edge of the floodplain if they were at the same elevation. Under the new system, somebody who is right at the edge of the floodplain is going to pay less than someone who is right next to the water."

Gary Nigro, chief engineer for the Oakland County Water Resources Office, said major flooding events have been increasing across the county as more intense rainfalls have been occurring, but that does not mean that the stormwater systems are not working as they should, a common misconception he added.

"There seems to always be this question of 'what broke and what are you doing to fix it?'," he said. "I try to explain to residents that the system is only designed for certain sized rain events. If you have a five gallon bucket and you try to put seven gallons of water in that bucket, would you say the bucket is broken? It held the first five gallons as designed to do. It's kind of the same thing that's going on across our stormwater systems."

Nigro said the county's stormwater drains are designed to carry water away from larger areas across the region, but that these more frequent, heavy and concentrated rain events in neighborhoods can cause problems within the local stormwater drains that cannot handle that were not designed to handle that much water in such a short amount of time, which leads to backuped basements and properties flooding.

Building coverage includes the insured building and its foundation; the electrical and plumbing system, central air conditioning equipment, furnaces, water heaters, refrigerators, cooking stoves, built-in appliances such as dishwashers, and permanently installed carpeting over unfinished flooring.

Contents coverage includes clothing, furniture, and electronic equipment, curtains, portable and window air conditioners, portable microwaves and dishwashers, carpeting that is not already included in property coverage, and clothing washers and dryers.

To learn more about the NFIP and to see if your community participated, visit https://www.floodsmart.gov/ or https://www.fema.gov/flood-insurance/risk-rating/profiles.