Are You Due a Refund on your Flood Insurance Policy?
The Grimm-Waters Homeowner Flood Insurance Affordability Act , passed by the Senate and House of Representatives on March 13, 2014 and signed into Law by President Obama on March 21, 2014, reverses some of the sections of the Biggert-Waters Flood Reform Act of 2012 (BW-12). The two most controversial sections of BW-12 were section 205 which eliminated subsidized premiums on many Pre-FIRM homes and section 207 which was to eliminate the grandfathering provisions.
Section 207 was to have become effective on October 1, 2014 and this section has been repealed in its entirety. Grandfathering remains in effect which means buyers may assume the flood policies from the sellers.
Section 205 became effective on October 1, 2013 so flood policies renewed on or after that date may have seen rate increases due to BW-12. Grimm-Waters specifically calls for a refund of premiums paid due to BW-12. The “bought/sold” provisions of 205 are repealed.
So who is actually entitled to a refund?
The October 2013 premium increases brought about by BW-12 applied only to Pre-FIRM properties that were rated using subsidized rates. These are homes or commercial properties that were not rated using an elevation certificate and had a building permit issued prior to December 31, 1974 or prior to the date of the Initial Flood Insurance Rate Map. This Initial FIRM date varies by community. For example, Charleston County’s Initial Firm date is 4/27/1971 and isle of Palms is 4/2/1971. The Initial Firm date for your community can be located at www.fema.gov/national-flood-insurance-program. Click on the Community Status Book link on the right side of the page and then select South Carolina.
Thus the first criteria for a refund is to have a policy insuring a Pre-FIRM property with subsidized rates.
If this does not apply to your situation, you are not due a refund. If this does apply, read on for the second criteria.
BW-12 required an immediate shift to actuarial rates for Pre-FIRM primary and non-primary homes and businesses with a flood policy first in effect on or after July 6, 2012 (includes “bought/sold situations) and on flood policies that lapsed and were reinstated on or after October 4, 2012. If the premium on your Primary home policy increased because of the requirement to get an elevation certificate and the result was higher rates, you will get a refund.
Thus the second criteria for a refund is that your home must be Primary and you were required to get an elevation certificate and that resulted in higher rates.
IS BW-12 still causing some rates to go up?
Yes. BW-12 also required up to a 25% rate increase on Pre-FIRM non-primary homes and businesses with a flood policy in effect before July 6, 2012. This rule was not changed by Grimm-Waters .
Did some policies not affected by BW-12 have their premiums go up?
Yes. The National Flood Insurance Program (NFIP) routinely raises rate each October. Thus almost all policies are seeing a rate increase on the first renewal after October 1. Unless your policy meets both criteria above, you will NOT be receiving a refund due to this annual rate increase!!
I have received the renewal invoice for my Flood policy. Should I pay it or wait to see if the new Law changes anything?
By all means, pay the invoice prior to the renewal date. It is better to overpay and later get a refund than to let the policy lapse!! It will be months before FEMA and NFIP can study and enact the changes called for by Grimm-Waters.
When will I expect to receive my refund?
Now that the President has signed the Grimm-Waters bill into law, FEMA and NFIP must figure out how to implement the provisions of the new law. This will take time. Then FEMA and NFIP will provide instructions to the Write-Your-Own companies (the company that actually issues your flood policy). These companies will then need to re-program their computers to reflect the new rules.
It could be several months, maybe more than a year, before you get your refund!
Should I be concerned about my insurance company not giving me my money back?
No. This is not an insurance issue. The refund is coming about due to Federal Law. You will get your refund! There is no need to call your insurance agent. Your agent has zero control over the refund.
Does Grimm-Waters affect my premium in other ways?
Yes, indeed! An annual surcharge of $25 will be applied to all primary residential policies and a $250 surcharge to all non-primary residential policies and all non-residential policies.
All renewal premiums on subsidized policies must rise by at least 5% annually and no more than 15%. The pre-BW-12 rules did not mention a mandatory annual increase and capped rate increases at 10%
Who should I call to express my frustrations with this mess?
Definitely do not call your insurance agent!! Your agent is just the messenger. As stated before, this is a matter of Federal Law so you should express your concerns with your congressional representatives.
Any other thoughts?
Congress is determined to make the National Flood Insurance Program self-sufficient. The only way to do this is to generate more dollars from the policyholders. The policyholders are the only source of income! There can be no question that premiums are going up and they will go up faster and higher for subsidized properties.