Monday, April 24, 2006

Thousands in N.J. to be affected by flood insurance overhaul

From the Star Ledger:
Repeatedly flooded properties targeted

Concerned about the solvency of the National Flood Insurance Program, federal lawmakers are poised to slap new restrictions on some of New Jersey's most valuable real estate: thousands of flood-prone homes that sit along barrier islands and rivers.

Legislation likely to be introduced in the coming weeks will target "repetitive-loss" structures across the country, congressional officials said. Possible solutions include buying and demolishing homes that flood repeatedly, stripping them of insurance coverage or greatly raising premiums.

Congress, which today returns from a two-week break, has been forced to remake the controversial flood insurance program in the wake of hurricanes Katrina, Rita and Wilma. The devastating storms plunged the program into a $20 billion-plus deficit and few experts believe the program can recover without a massive overhaul.
In New Jersey, which has one of the nation's worst records on repetitive claims, legislative changes would affect 7,376 structures. The state's 7,376 flood-prone buildings represent less than 4 percent of the 200,000 properties covered by the program but account for more than 50 percent of the claims paid since 1978, amounting to $334.2 million, according to federal data.
Critics of coastal development argue a decade-long building boom has put billions of dollars worth of real estate in harm's way. They say New Jersey is overdue for a destructive, catastrophically expensive storm, and they point to the flood insurance program as being responsible.

"These spikes in repetitive damage are created by flood insurance itself," said Tim Dillingham of the American Littoral Society, a coastal environmental group based on Sandy Hook. "It pays people to rebuild in the same spot. It's crazy."


Blogger Metroplexual said...

Don't forget this also affects people in Wayne along the Passaic River as well as people along the delaware and its tributaries. Unlike the shore comunities these people tend not to be wealthy.

Up this way we have been getting 100 and 500 year storm events frequently. Sparta Glen in Sparta was hit in 2000 (I think?) with a 500 year flood with 14 inches in 6 hours. The Pequest and Delaware flooded twice over the last couple of years. We were also affected by Hurricane Ivan as well which caused flooding and much damage.

The joke lately has been, 100 year storms, why they happen all the time.

4/24/2006 12:51:00 PM  
Blogger lisoosh said...

Hooray! About time. I am sick of subsidizing the rich.

4/24/2006 12:51:00 PM  
Blogger chicagofinance said...

I posted this item a few weeks ago, but I will post it again because it is topical. This material relates to private insurance coverage, but it parallels the steps that are being taken by the Federal government in the national programs it underwrites.

Note, the source material of this letter is a cold lettering campaign I conducted in March.

You Homeowner’s Insurance Rates Will Rise Soon – Be Prepared

The hurricanes that ravaged the Gulf Coast last summer are beginning to wreak havoc with homeowners' insurance coverage in states far removed from where the storms hit.

Still reeling from an estimated $56 billion of hurricane-related losses, major insurers are dropping policies or not writing new ones in coastal areas from Texas to Florida and on the Eastern Seaboard as far north as Massachusetts. The moves have left homeowners in a number of states scrambling to find new coverage, often at higher cost.

Meteorologists say conditions — including warmer temperatures in the Atlantic Basin and cooler temperatures in the Pacific Ocean — are ripe for the Northeast coast to be hit by a whopper of a hurricane this season. Fearing hurricanes could hit as far north as New England, insurers are tightening policies.

Home insurers are winning regulatory approval to raise premiums in states hit by hurricanes in 2005, and rate increases are spreading far beyond those areas, as the industry comes under pressure.

Allstate, the nation's second biggest home insurer, after State Farm Insurance, says it plans to seek premium increases to help offset higher costs. The company recently raised premiums by 8.5% in New York State, and says it will ask regulators in Connecticut and New Jersey to approve increases.

States barely touched by last summer's hurricanes are feeling the impact. In New York, Allstate, the largest insurer in the state, recently announced it would drop 28,000 policyholders in eight counties, including New York City, citing "overexposure" to potential weather related losses.
The latest developments come more than 12 years after Hurricane Andrew, previously the most expensive U.S. storm, led to widespread losses among insurance companies and reshaped the home-insurance industry. Companies raised rates, states set up high-risk and catastrophic insurance pools, and the industry introduced such features as the separate windstorm deductible, which transfers much of the financial risk back to homeowners themselves.

Helpful To Know

As premiums rise and insurers look to cut risk exposure, industry experts advise consumers to keep a low profile. Self-insure as much as possible by carrying as high a deductible as you can afford to keep premiums low and remain attractive to insurers. Also, avoid filing small or petty claims. Never file a claim for maintenance-related damages such as a chronic water leak, as even one such claim could cause you to be dropped by your insurer.

When purchasing home insurance, buy from a company with a high financial rating to minimize the chance that your insurer will drop you because of its own financial problems or fail to pay a claim.

4/24/2006 01:29:00 PM  
Blogger bairen said...

It's about time the fed gov't is doing something about the flooding.

I think this fed flood insurance program is one of the reasons the shore has become so expensive. There is no risk to the hoeowner of catastrophic loss since the feds will bail them out. Stop the madness.

As for the people who live in flood plains in Bound Brook and Wayne. If your home is severely damaged or destroyed, move somewhere else. You can't expect the US to keep bailing you out when you knowingly live in a flood prone area.

4/24/2006 02:57:00 PM  
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5/18/2006 04:31:00 PM  

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