It could have turned into just another sad tale about spiraling flood insurance rates.
Emily and Brian Craig discovered their flood policy was jumping from $2,293 to a whopping $21,433 because they happened to buy their St. Petersburg home after an overhaul of the National Flood Insurance Program. Under the new rules, they immediately had to pay what FEMA deemed full flood risk for the property.
"Had we known any of that we would never have purchased this home," said Emily Craig, a 43-year-old elementary schoolteacher and lifelong Pinellas County resident who paid $242,000 for the 1,400-square-foot ranch home. "We're not going to put ourselves in a position where we can't afford something."
But then, the Craigs' situation took a hopeful turn.
Using their existing flood elevation certificate, they challenged FEMA, showing at least part of their property was on higher ground and should be zoned as such. Insurance giant Lloyd's of London agreed with the Craigs and wrote a policy for them at a lower rate.
The new policy is bare bones. It doesn't cover possessions in their home that are destroyed by flooding and it carries more risk because Lloyd's is a surplus insurer not overseen by Florida insurance regulators. But it satisfies their mortgage lender, and their new annual premium is a far more palatable $3,300.
The Craigs couldn't wait to see if Congress delays the more devastating impact of the much-maligned Biggert-Waters Flood Insurance Reform Act of 2012. Nor could they hold out for the Florida Legislature to create new rules enticing private insurers to provide flood coverage.
So, like some others caught up in the national flood insurance saga, they're carving out their own solution to stay in their home and stay afloat.
Fighting the system
Jake Holehouse, a St. Petersburg insurance agent who specializes in flood issues, anticipates more frustrated homeowners taking matters into their own hands.
"They don't know what the federal government is going to do, and we don't know what effect the state legislation will have," he said.
Some, like the Craigs, are turning to Lloyd's of London. Others are seeking out the few private insurers currently offering flood coverage, such as Homeowners Choice Property & Casualty Insurance in Tampa. Even those who stick with National Flood Insurance Program policies are finding ways to save by getting new flood elevation certificates or shopping around with different insurance agencies that underwrite NFIP policies.
J. Kurt Petersen, a local banker, Shore Acres homeowner and budding self-made expert on flood insurance, offers this piece of advice: Don't be afraid to fight the system. More than once if necessary.
Petersen's policy was canceled when his bank failed to pay his flood premium out of escrow on time. The cancellation resulted in Petersen losing his flood subsidy.
His insurer, State Farm, subsequently offered to place a new policy through the National Flood Insurance Program costing $7,000 a year. But Petersen balked that it was still too high.
He talked with American Strategic Insurance about the same thing: getting a new NFIP policy. ASI came back with a more affordable premium of $2,900, only about 30 percent more than what he was paying under the NFIP policy that had lapsed.
Petersen was amazed, calling it "quite a large discrepancy with the very same federal program."
The difference, he said, was that State Farm relied on information about his property inputted directly by NFIP to come up with a standard quote. ASI used software that included much more detail about his home.
State Farm spokeswoman Michal Brower said she could not address specifics about the case but insisted flood coverage and costs should be identical no matter who the NFIP policy is purchased through. If there are any mistakes made in offers, she added, that should be caught during FEMA's underwriting process.
Holehouse, however, said he believes some agents are more thorough than others in finding the lowest rates. Property owners can lower their cost by ensuring that their insurance agents input details such as a home's type of foundation and nuances like whether there is a crawl space under a house.
Just by noting a house has a crawl space instead of sitting directly on a slab could change a foot or two to its elevation level, potentially affecting its flood rate by thousands of dollars.
No perfect answers
None of the solutions to the flood insurance crisis are perfect.
• The private insurers who have entered the flood insurance market are being highly selective on the houses they will insure. Homeowners Choice, for instance, is only writing flood policies for a select few of its existing customers.
• Even if the state streamlines the process, private insurers are expected to be reluctant to write a significant amount of flood business if they don't have sufficient data to analyze the risk. In an ideal scenario, agents say, they would have access to statewide flood maps and elevation details that go beyond FEMA's flood zones.
Another obstacle: FEMA doesn't allow major marketers of National Flood Insurance Program policies, like Wright National Flood Insurance, to start selling their own private flood policies and continue writing NFIP policies.
• Going with a surplus insurer like Lloyd's has setbacks as well, noted Robin Sollie, president of the Tampa Bay Beaches Chamber of Commerce and an opponent of Biggert-Waters.
Some banks requiring flood coverage do not accept carriers like Lloyd's. Not only are the policies not regulated, there may be other restrictions and higher deductibles, and there are no guarantees premiums won't escalate in the future.
Moreover, if there is a future problem with a policy and the homeowner has to return to the National Flood Insurance Program, "they're automatically at the 100 percent actuarial rate," said Sollie.
Sollie holds out hope that Washington, D.C., politicians will delay some of the rate increases tied to Biggert-Waters or reverse it altogether.
"It is our opinion and stance that everyone knows now that (Biggert-Waters) failed … and it should be treated like a business that is failing," she suggests. "Shut it down, re-evaluate, do the affordability study, make sure FEMA fully understands all permutations; then draft and revote this."
That may be the only solution that works in the long run for homeowners like Emily Craig.
The policy she secured with Lloyd's has bought some time. But Craig worries about the plummeting resale value of her home if the day of rate reckoning is merely postponed. More imminently, what happens when the Lloyd's policy expires next October?
"This is all well and good for this year," she said. "But will we be in the same spin zone at the end of 2014?… We have horrid timing apparently."
Jeff Harrington can be reached at (727) 893-8242 or [email protected]