A St. Petersburg legislator is smart to begin laying the groundwork for a homegrown flood insurance solution. But the Legislature's challenge, should it embrace Sen. Jeff Brandes' plan, will be to craft a solution that serves consumers and not just the insurers' bottom line. With property insurance coverage, the devil is always in the details.
Brandes on Tuesday filed a bill to create a regulatory framework to encourage private insurers to write flood policies in Florida. The Republican wants a private market that's more flexible than the National Flood Insurance Program, which requires owners to take policies for the home's replacement value up to a hard cap of $250,000. Brandes wants private insurers to be able to offer just partial coverage, such as to cover a home's remaining mortgage, to keep costs low.
That is attractive given that such policies may help homeowners avoid losing their homes because they can't afford full flood coverage under new higher rates in the national program. Less clear is how such policies would be regulated or priced; whether insurers will be able to cherry-pick policies; or whether banks would agree to less-than-replacement-value coverage. Brandes is betting that private insurance solutions would be cheaper than the astronomical rate increases some new buyers of older homes are seeing under the 2012 Biggert-Waters Act.
The federal law, which took effect Oct. 1, is phasing out subsidies for older homes over the next five years, and immediately when the home is sold — which is causing shock waves in some of Tampa Bay's older neighborhoods. Next year, the same subsidy elimination plan is scheduled for properties whose owners have subsidized rates because new maps drew them into a higher-risk flood zone.
Already, private insurers in Florida who have received permission to add flood coverage to their existing homeowners' policies quote base prices that seem more reasonable. But that can mean little to a specific homeowner whose house sits below the so-called Base Flood Elevation — which is the Federal Emergency Management Agency's estimate of the flood height of a once-a-century storm.
The best solution remains for Congress to hit the pause button on Biggert-Waters and go back to the drawing board. Florida threatening to go its own way may encourage that. Florida policyholders have been a major donor to the national insurance program, contributing $4 in premiums for every $1 in claims. But state lawmakers shouldn't wait. Brandes' plan, along with others expected to emerge, will need a thorough vetting during the spring legislative session. Tallahassee will need to ensure it's not cleaning up Washington's mess by creating another one.