Flood insurance prices could soon skyrocket – NJ fighting back
Some parts of New Jersey could face flooding issues as a nor’easter brings heavy rain and strong winds to the state on Tuesday.
With flooding a growing concern in New Jersey, as well as many other parts of the country, the Federal Emergency Management Agency (FEMA) has adopted a new rating system that will soon increase the cost of federal flood insurance for most policyholders.
It's a hike increase that Sen. Bob Menendez (D-NJ) is hoping to stop.
According to Menendez, FEMA’s Risk Rating 2.0, which went into effect this month, immediately increases the cost of flood insurance for all new policies, and will push policy premiums higher for 77% of current policyholders in the Garden State starting April 1 of 2022.
Menendez said under this new system, what a homeowner pays for flood insurance will be based on an individual home’s risk.
“It’s not based on flood maps. It has a series of different determinants that are going to really create a real challenge for policyholders,” he said.
Menendez said the result will be such a strong rate shock that it's estimated 900,000 policyholders will drop their flood insurance over the next decade because they simply won’t be able to afford to have it – a scenario that is simply not acceptable.
“Insurance is about spreading risk. The bigger the pot the less the cost, the smaller the pot of people being insured, the higher the cost – so this goes contrary to the whole idea of a national flood insurance program,” Menendez said.
The senator is part of a bipartisan group of lawmakers that recently sent a letter to the Biden administration seeking a delay in enacting the new system, especially because it doesn’t make sense to start raising rates for homeowners if they’re not in a flood zone.
Additionally, new legislation being introduced will put a statutory cap on how much flood insurance policy rates can be increased on an annual basis and cap profits of private insurance companies that write policies. The legislation also calls for more money for mitigation, including building up protective sand dunes, elevating homes and expanding the Blue Acres program that offers buyouts to homeowners in flood zones.
Menendez said increasing the Blue Acres program is especially important. "For every dollar of mitigation we spend, the government saves $6 on the back end, which helps put the program on a path to solvency.”
The legislation also calls for flood maps to be used when determining who is at greater risk, and what the price of different policies should be.
Menendez stressed the national flood insurance program should “give coverage to policyholders, put us on the pathway to sustainability and give people security.”