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Flood insurance changes prompt fears
New rates take effect Oct. 1 under federal government act
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A packed house of nearly 150 people showed up at the Indian Rocks Beach City Hall for a forum on the new flood insurance rates.
INDIAN ROCKS BEACH – It was a packed house, standing room only at the Indian Rocks Beach City Hall on Thursday, Sept. 19. IRB residents and those from nearby beach communities gathered to hear what impact the next phase of the Biggert-Waters Flood Insurance Act will have on their rates. The news wasn’t good.

The act was actually passed by Congress in July 2012. It essentially says that the cost of flood insurance must be able to cover the cost of dealing with floods around the country.

The national flood insurance program is managed by FEMA, which according to the experts on hand is running a $24 billion deficit. The Biggert-Waters act wants to eliminate that.

Patti Latshaw is a flood insurance expert with the Wright Insurance Group and has been watching the act since it was passed.

“The bill wants to get rid of subsidized flood insurance rates,” she said. “It mandates that FEMA must charge appropriate rates based on the Flood Insurance Rate Map.”

She explained that when the act first passed in 2012 there were no consequences. But on Oct. 1 of this year the new rates will kick in. An initial round of rate increases affecting secondary homes began Jan. 1.

“Not only will there be higher rates but there also will be a 5 percent surcharge on every policy,” she said. “That money is to go into a reserve fund so in the future FEMA won’t have to borrow from the Federal government to do its work.”

The delay in imposing the new, higher rates was something that was addressed by another member of the panel of experts. Karen Bravo of the Thorn Collection Real Estate Company said people are reacting now when they probably should have reacted much earlier.

“Among agents and homeowners there is a lot of panic right now,” she said. “Lots of people have taken the stance that if they ignored it, it would go away. But it is here.”

She said there is plenty to be concerned about.

“I’m not supposed to scare you, but other agents are saying the same thing, there is a lot of fear and vulnerability out there,” she said. “If you have a mortgage you are required to have flood insurance. I fear the recovery which we had been experiencing in the economy is being taken away.”

Bravo told of one client who is looking at an annual flood insurance rate of $75,000 for a piece of waterfront property in St. Petersburg once the new rates kick in.

Jennifer Rabon with the Connelly, Carlisle, Fields and Nichols Insurance Company, said there are ways to cut down on the insurance bill.

“You can eliminate insurance on the contents of your home; mortgage companies don’t require insurance on contents,” she said. “You could also take on a higher deductible. I had a client in Shoreacres who did that and lowered his insurance bill from $9,000 to $3,500. He still didn’t like the $3,500, but it was better than $9,000.”

Perhaps the most unsettling news of the evening came when Pam Dubov, the Pinellas County appraiser, spoke.

“This year all the beach communities had increases in appraised value for the first time in years,” she said. “It appeared we were turning the corner. In fact I believe the beach communities were leading the way in the recovery. But now we’re facing this new threat.”

She said prospective buyers will have to take into consideration the cost of flood insurance before they purchase a property.

“If you have paid off your house and have no mortgage and decided you didn’t want to buy flood insurance, then you had better hope the new buyer has cash because the minute they need a mortgage they are going to have to get the insurance,” she said.

Dubov said the notion that only rich people who live on the water are subject to the new rates is wrong.

“There are properties in St. Petersburg, Kenneth City and Pinellas Park, all far from the water, which are subjected to the new rates.”

Dubov said the fourth quarter of this year, once the new rates come into effect on Oct. 1, will likely mean adjustments in home values.

IRB Commissioner Phil Hanna was the final member of the panel to speak and he urged the audience to get active in trying to have this bill repealed.

“How many of you have phoned or written your congressman?” He asked. “Not enough. We have to get involved.”

Hanna said from a business standpoint the bill makes sense. He said it wasn’t wrong. But people just can’t handle it all at once so it is important that it be stopped.

“We all have friends and relatives out of state,” he said. “We have to get them to contact their representatives. We have to get a groundswell going. We’re not going to stop natural disasters, but we all help to pay for events in other states and they should be helping us.”

Mayor R.B. Johnson, who chaired the meeting, called the impending flood insurance rates a crisis.

“This will cause a ripple effect,” he said. “People won’t be able to sell their homes. This bill has had unintended consequences, the rules have changed in the middle of the game. We just can’t bear this burden.”

Indian Shores resident Michael Grimes, who owns a small business, said as it stands his property is unsellable.

“With property values dropping the next thing the banks are going to call on the loans, what are we going to do then?”

Latshaw said that was a real concern.

“I was at a conference recently with the big companies, the Bank of America, Wells Fargo and others and they all expressed concern about financing any property along the beaches.”

From the audience, speaker after speaker wanted to know the impact on their own property and each time was told it would be almost impossible to tell without a proper analysis. The impact depended on such things as the type of home, its exact location, its elevation, when it was built and so on. Each was told to contact their insurance representative and get that analysis done.

The maximum increase in rates is 25 percent a year until the full actuarial rate is achieved. Another piece of advice from the panel was not to let your policy lapse because all new policies will be immediately subject to the full actuarial amount.

October 1 is the date when the new rates kick in.
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