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Low-risk Mich. pays high cost for flood insurance

by Candice Miller on July 12, 2010

The Detroit News

Harrison Township — High premiums for flood insurance in low risk areas have many shore-side Michiganians awash in frustration, looking for relief and charging they’re bailing out disaster-prone areas.

Many are fighting waves of resistance from insurance companies and banks as they try to prove their homes and businesses aren’t at the same risk as those along river basins in the plains states or the Gulf Coast, resulting in higher insurance costs. In updating its flood plain maps in recent years, the Federal Emergency Management Agency designated many Michigan properties as being in “high risk” areas, meaning they’re vulnerable to damage from rising waters.

That doesn’t sit well with Bob Brzostowski of Harrison Township.

“It has never flooded here,” he said of his home on Seaway off Jefferson Avenue.

Brzostowski paid $800 a month for 16 years for flood insurance even though he’s never seen flooding in his area. He escaped paying the insurance the final four years of his mortgage, he said, only because the mortgage was bought by another bank that determined his house wasn’t in danger of flooding even though federal flood maps said otherwise.

“It is a shame what they impose on people,” he said, noting a neighbor wasn’t able to get similar relief from his bank.

“It’s crazy. … It’s to pay for everything going on down South.”

Brzostowski and other homeowners say flood-risk mapping along Michigan’s shorelines has been an issue for years, but one that’s intensified recently as rates have increased and more properties have been designated “high risk” even as Great Lakes water levels have dipped to historic lows. Homeowners along the state’s thousands of miles of freshwater coastline are being affected, including thousands in Metro Detroit’s most popular waterside communities, such as Harrison Township, St. Clair Shores and Gibraltar.

Rep. Candice Miller, R-Harrison Township, who represents most of the people who live along the shores of Lake St. Clair, has opposed reauthorizing the FEMA-run National Flood Insurance Program, created in 1968, until Michigan homeowners get some relief.

“My constituents in Michigan, with little risk of flooding, who have experienced little or no flooding, are funding the National Flood Insurance Program at astronomical rates,” Miller said on the floor of the House during recent debate on extending the flood insurance program’s congressional authorization. “States that we see flooded year after year, and again allow people to keep building and rebuilding in a flood plain, or states who keep experiencing hurricanes, are essentially using FEMA as their own personal ATM.”

Opposition led by Miller and other frustrated lawmakers has helped delay a long-term reauthorization of the flood insurance program.

From 1978 through March of this year, Michigan has remained one of the lowest beneficiaries of the National Flood Insurance Program, federal statistics show.

During that period, the state has had 6,414 paid claims, totaling about $45 million, while homeowners in Louisiana — the biggest flood insurance claimant state — have had payouts on 315,942 claims, worth a total of just over $16 billion.

When Hurricanes Katrina and Rita hit the Gulf Coast in 2005, the flood insurance program was left $17.8 billion in debt, now more than $19 billion.

Because the FEMA-generated flood plain maps show many Michigan properties near the lake in danger of a flood, mortgage lenders will often require flood insurance. And though the chance of a payout is slim, many homeowners forced to buy the insurance pay some of the program’s highest rates — not far below those of the Gulf Coast, for example. The maps equate the flood risks for towns and cites along Michigan’s shoreline to seasonally flood-prone riverside towns in the Great Plains.

Homeowners nationwide have complained about increased rates, and buyers often are surprised to find out their mortgage lender will require a high-premium flood insurance policy to secure a loan, even if the neighborhood isn’t prone to flooding.

In some cases, parts of homeowners’ properties are within inches of an established flood plain boundary that is based on lake levels from years ago. Lake St. Clair, for example is 5 1/2 feet below the FEMA-designated flood line.

FEMA says it’s taking steps to update flood insurance maps and keep consumers informed about changes to their risk assessments and why they’re being made. The agency lowered rates for customers in three Michigan communities in 2006 — Saugatuck, Saginaw Township and Vassar — because the towns took steps to reduce risk of residential flooding.

“For the most part, you can assume with very high likelihood that there just isn’t the same flood risk along the Great Lakes as there is in a riverside flood plain in North Dakota,” said Judah Myerson, an Ohio risk consultant who helps homeowners appeal their FEMA flood map designations.

Yet in some cases, flood insurance premiums reflect otherwise.

Dave Consiglio, 53, of St. Clair Shores refuses flood insurance because he said there’s no need, even if his home is designated by FEMA to be prone to water damage.

He’s watched with dismay as mortgage companies have forced his neighbors on Revere to buy insurance. “It’s a nice racket for the insurance companies,” he said. “We have never had flooding for 100 years.”

Mario Como, who lives on a canal east of Jefferson in St. Clair Shores and who owns Realty Executives Select there, said the premiums can shoot down a home sale.

Flood insurance can kill sales

“Flood insurance will typically exceed the cost of homeowner’s insurance for the year,” Como said. “Every home with a federally backed mortgage all are required to have a flood certification as part of the loan process. The problem is, it is notoriously one of the last steps in the process.”

Como, who has filed petitions to reduce or eliminate flood insurance for his properties, said buyers should have an elevation study done during inspections.

He said just a tenth of an inch can put a home in need of the costly insurance.

Once a surveyor has determined a property is outside a flood plain, an application for relief can be made to FEMA.

The National Flood Insurance Program — which is sponsored by the federal government but administered through private insurers — was this month given another temporary reauthorization through September, but lawmakers from around the country want to work out a long-term deal by fall.

Lawmakers from Gulf Coast states say their constituents want lower rates, with a mandate for insurance on other lower-risk states.

Como wonders why it’s necessary.

“Why should they have to go through all that? It is a constant fight with the government.”

Additional Facts Flood of premiums

Some local flood insurance rates are based on FEMA maps used in 1979, even though recent studies show regional water levels have been historically low. Here are some affected communities:
Gibraltar: One of the state’s most flood-prone cities, leading to more than $1.8 million in insurance payouts since 1978. After a 1985 flood, the city and property owners built flood control devices that have eased the risk, and water levels have lowered.
River Rouge: The city’s northeast corner — south of Detroit’s Zug Island — is covered by a flood map drawn in 1978. Despite water on two sides, the city has levees and other control devices. Since 1978, there have been three flood insurance claims.
St. Clair Shores: Residents frequently battle FEMA over flood maps. Since 1978, the city has been responsible for 382 flood insurance claims, with a total payout of just under $412,500. But many residents whose properties fall within inches of the flood plain pay premiums in the hundreds of dollars a month.
Harrison Township: Homeowners near Lake St. Clair — with its historically low lake levels — have been lumped in with some of the highest-risk areas in the country.

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