Press of Atlantic City

New Jersey: Flood Insurance Changes Worry Jersey Shore Residents

ATLANTIC CITY - Pat and Alonzo Bailey live in a modest, one-story house two blocks from the bay in Bungalow Park. The couple say they spend about $2,600 on flood insurance annually, a rate determined by three factors: the elevation of their home, its location in the 100-year floodplain and a lack of flood vents on the foundation.

Starting next October though, the Federal Emergency Management Agency may begin using many more variables to pinpoint exactly how much the Baileys should be paying, using "state-of-the-art" data collection provided by the private sector.

It's a new system local officials and activists worry could increase premiums for some island residents and burden those least able to afford rising costs.

"So, how will it work?" Pat Bailey asked sitting on her couch Tuesday morning.

Few people outside of the government know for certain.

The federal agency is calling it "Risk Rating 2.0"- a way to give "more accurate rates based on (homeowners') unique risk," according to a three-paragraph description on FEMA's website.

A building's precise distance from the water and the cost to rebuild a home are among the new measures FEMA will use to figure out more precise payments. Someone living in Venice Park near the bay may have higher rates than someone living farther from the water.

A FEMA spokesperson said "multiple" factors will determine a person's flood insurance.

"By leveraging industry best practices and technology, FEMA plans to reduce the complexity of buying flood insurance, so that it is as straight-forward as homeowner's and auto insurance for both agents and applicants," the website reads.

Ocean City insurance agent Tom Heist calls the reform "the biggest thing to happen" to the federal flood insurance program since its inception in the 1970s, and one that has been quietly rolled out.

Heist, owner of Thomas Heist Insurance Agency, said FEMA could use countless characteristics to determine someone's flood insurance, including the age of the storms drains and bulkheads in a neighborhood, the number of rain events and specific construction qualities of a house.

"It could be thousands of data points," Heist said. "Is it a house built with average construction qualities or a super fancy, nice house with elevators? What are the barriers in front of it? Are there dunes? How old are the drainage systems in that municipality?"

Residents in low-elevation homes close to a water source in towns that aren't taking steps to mitigate flooding could be hurt the most, he said. Heist pointed to parts of Atlantic City as being hit by the changes, such as around Florida and Texas avenues, where there are outdated storm drain systems and crumbling bulkheads.

Meanwhile, Heist said, homeowners with higher structures in communities pro-actively mitigating flooding could see their rates hold steady or decline. Property owners in Brigantine, for instance, may have less reason to worry after the city added four pumping stations and refurbished another existing one two years ago.

Why the change though?

FEMA has been straddling debt and facing increasing competition from private companies, which Heist said in recent years have begun offering lower flood insurance rates than the government. Heist's firm consults with about 10 private insurers to compete against FEMA's rates. Two years ago, he said, that number was zero.

Private coverage in New Jersey grew by more than $10 million from 2016 to 2017, according to S&P Global Market Intelligence.

"The government is losing policies at a very fast rate," Heist said. "Is that a good thing or bad thing? I don't know. But it's scaring the government, and they want to start acting more like a private insurer."

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Read also Millions of Carolina Homes Are at Risk of Flooding. Only 335,000 Have Flood Insurance (NYT-Sept.2018)