Massachusetts ranks low in flood insurance claims

MARSHFIELD – Since the 1950s, 32 states have declared major flooding disasters at least 20 times due to the catastrophic effects of flooding, allowing them to collect federal dollars to fix homes, businesses and infrastructure. Massachusetts isn’t one of them. In fact, the state has just 14 flood-related disaster declarations on its books, according to data from the Federal Emergency Management Agency. The declaration count jumps to 29 when all disaster types are considered, including hurricanes and tornados. Kentucky has seen flooding so bad it warranted federal assistance 32 times. Smack in the middle of the American Heartland, Iowa has had 42 flood disasters. And Minnesota, the Land of 10,000 Lakes, has seen 43 cases of extreme flooding in the last 60 years. Coastal communities like Marshfield and Scituate have come under scrutiny since the Jan. 26-27 blizzard drew national attention and painted the state’s coast as the epicenter of disastrous flooding. While the coast undoubtedly floods, only seven states have made fewer flood-related disaster declarations than Massachusetts. The state as a whole often operates in the black within the National Flood Insurance Program, which homeowners with federally backed mortgages who live in high-risk flood zones are required to pay into. Doris Crary, who owns properties in Marshfield and Scituate, serves on the Marshfield Coastal Coalition and has been advocating for a sustainable flood insurance program for decades. She said there’s no doubt that Marshfield and Scituate have gotten more out of the program than they put in, both in claims and grants to elevate properties. “But in total, the state pays in more than it takes, and that’s the whole concept of insurance. It gets balanced out,” she said. “We went a lot of years without any bad storms and we’ve worked to raise properties.” Approximately 59,000 policyholders in Massachusetts paid more than $78.2 million in flood insurance premiums between Jan. 1 and Dec. 31 of last year according to data from FEMA. Marshfield and Scituate each have nearly 1,400 policyholders who paid a combined $4.5 million in premiums during that time. But between Oct. 1, 2013, and Sept. 30, 2014, the National Flood Insurance Program paid out just $1.2 million for 122 claims to Massachusetts policyholders. A look at the last three years shows Massachusetts policyholders have paid about $220 million in premiums and collected about $30 million in claims. While FEMA does not provide data on total premiums collected, the National Flood Insurance Program has covered about $347 million in claims to Massachusetts since 1978. The program has paid out the largest sums to states that often operate in the red, including $5.6 billion to Texas, $1.2 billion to Pennsylvania and $1 billion to Alabama. Louisiana has by far collected the most in claims since 1978: $16.7 billion. Bob Desaulniers, an insurance specialist with FEMA Region I, said such data can be misleading, though, since calculating profit takes more than subtracting claims from written premiums. Since the program is administered through private insurance companies, administrative costs account for up to 30 percent of premiums collected. “We have to pay for salaries, adjustors, underwriters, so you can’t just look at premiums and losses and say it’s a profitable year,” he said. FEMA Administrator Craig Fugate told a Senate committee in September 2013 that the National Flood Insurance Program currently brings in $1.5 billion less than needed to break even each year, forcing FEMA to borrow from the U.S. Treasury during catastrophic flooding events. “Although payments have been made to reduce this obligation, $24 billion in debt remains,” Fugate said at the time. Only properties located in a Special Flood Hazard Area, where the risk of flooding is highest, are required to carry flood insurance. But the damage from catastrophic events that empty the program’s reserve funds extend far beyond the coastline, where policy holders only pay several hundred dollars for coverage each year. “In fact, people outside of mapped high-risk flood areas file nearly 25 percent of all National Flood Insurance Program flood insurance claims and receive one-third of Federal Disaster Assistance for flooding,” according to information from the National Flood Insurance Program web site. When Massachusetts is in the red, Desaulniers said, it’s usually do to extreme cases of flooding, such as in 2010. “That year we saw flooding from Lakeville to Waltham,” he said. “We do pay out losses on property not in high-hazard flood zones, and more often than not, it’s inland.” A small percentage of properties insured by the National Flood Insurance Program are considered severe repetitive losses – meaning they have had at least four claims of more than $5,000 each, or at least two claims totaling the structure’s current value. Of the more than five million policies nationwide, less than 9,000 are for severe repetitive loss properties. A map provided by FEMA shows the largest concentrations are in Louisiana, Texas, Mississippi and Alabama, which were affected repeatedly during the 2004 and 2005 hurricane seasons. If coastal residents are rebuilding their seaside homes after every major storm, Crary said, they’re doing so with their own money. “The maximum you can get for one claim is $250,000, and the average home value in Plymouth County is about $360,000,” she said. “The program really is meant for the middle class.” President Barack Obama last year signed into law the Homeowner Flood Insurance Affordability Act, which aims to lessen the worst effects of the Biggert-Waters Flood Insurance Reform Act of 2012. Biggert-Waters eliminated flood insurance subsidies for homes that were originally built to code, but were subsequently remapped at a greater flood risk, causing premiums to soar. The financial impact would intensify with FEMA’s new flood maps that expand flood plains and raise predicted water elevations. FEMA has delayed Plymouth County’s maps until later this year after it answers appeals from Marshfield and Scituate. Desaulniers said Biggert-Waters “very specifically” targeted homes built before flood maps. That greatly affected the New England market, where up to 40 percent of the homes with flood insurance fall into that category. “It really wasn’t fair to target homes that were built with the knowledge that was available at the time and were in compliance, and to come back 100 years later and say, ‘you’re going to pay extraordinary money,’” Crary, the Marshfield and Scituate property owner, said. Desaulniers, the insurance specialist, said the affordability law strikes a balance. While it capped annual premium increases at 18 percent for most homes, it set it at 25 percent for Severe Repetitive Loss properties. The law also created a reserve fund fee, which is $250 for those repetitive loss properties and $25 for other primary homes. “Under those changes, Severe Repetitive Loss properties will start for the first to generate more premium,” he said. Reach Jessica Trufant at jtrufant@ledger.com.