Over 20,000 Michiganders see changes in flood insurance rates as federal government adjusts pricing system

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 Michigan 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, 68.5% of Michigan's 1,773 communities are enrolled in the NFIP program including.

This includes 45 communities in Clare, Gratiot, and Isabella countie, which have 215 active policyholders with a combined $36.3 million million in flood insurance coverage. Federal data shows the the cities of Alma, Clare, and Mount Pleasant having the most coverage at $6.3 million, $2 million, and $5.5 million spread across 41, 11, and 27 policyholder respectively.

Of those 215 active policyholders in those three counties, 107 are projected to see monthly rate decreases while 108 are projected to see monthly rate increases under the new pricing structure, of which 98 policyholders are projected to see monthly rate increases of between $1 and $10 per month with only 10 policyholders projected to see a monthly rate increase of more than $10 per month.

The rate increases for existing policy holders will not take effect until after April 1, the agency said. But new flood insurance policies purchased through the NFIP will be subject to the new pricing structure immediately. However, existing policyholders whose policies renew before April 1 and whose premiums will decrease under the new rating system will be allowed to take advantage of the lower rates sooner.

Since the 1970s, flood insurance rates have been based on a limited number of data sources and 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 now be based on an expanded set of data sources including home value and the cost to rebuild along with several others to determine a property's true flood risk including threat of extreme rainfall events, climate change, distance from 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."

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.