Get Real Estate Podcast
Get Real Estate Podcast
NFIP 2.0 Risk Rating, Maryland's Coastal Line, and How REALTORS® Can Be a Resource for Flood Insurance Information with Kevin Wagner and Richard Sobota
Maryland REALTORS® CEO Chuck Kasky interviews Kevin Wagner Community Assistance Program Manager Water and Science Administration at the Maryland Department of the Environment (MDE) and Richard Sobota Sr. Insurance Specialist Regional CRS Coordinator for Federal Emergency Management Agency (FEMA) about the National Flood Insurance Program, the Maryland Coastline, groups preparing for future rising tides, and the new risk rating. Learn a brief history of the National Flood Insurance Program and how the NFIP 2.0 model is set to have a multitude of advantages as it considers variables that were not included in the previous rating.
https://www.fema.gov/flood-insurance/risk-rating
https://mde.maryland.gov/Pages/index.aspx
The national flood insurance program was created by Congress in 1968, the N F I P has two main purposes to share the risk of flood losses through flood insurance and to reduce flood damages by restricting flood plain development. The program enables property owners in participating communities to purchase insurance protection administered by the government against losses from flooding and requires flood insurance for all loans or lines of credit that are secured by existing buildings, manufactured homes, or buildings under construction that are located in the special flood hazard area in a community that participates the N F I P risk rating 2.0, which became effective this past October 1st was designed to be a method by which the N F I P would correct the inequity built into the former underwriting and rating systems. The new methodology was designed to deliver rates that are act sound equitable, easier to understand, to better reflect a property's risk. Hello, I'm Chuck Caskey, Maryland realtors, CEO, and you are listening to get real estate, Maryland realtors podcast. Joining me today to help us understand flood insurance and risk creating 2.0 our first Kevin Wagner community assist student program manager in the water and science administration of Maryland's department of the environment. Welcome to the program, Kevin, thank you, Chuck. I appreciate the opportunity and, um, just enjoy my time here with you and Maryland realtors. Thanks. Great. And also with us today is rich Kubota, senior insurance specialist and regional community system coordinator for FEMA region three. That's the federal emergency management agency, although I'm sure most of you knew that, which is also a chartered property casualty underwriter. So we now really get this insurance stuff. Thanks for being here. Rich, thanks Chuck for having me and it's, uh, risk rating 2.0 was really all about outreach role out at this point. This is a perfect opportunity for us. Thank you. Great. It's our pleasure. Thanks son. Relatively short notice too. So we really appreciate your flexibility. Kevin, let's start with you from the Maryland perspective and rich is gonna jump in. I know you guys have made presentations before, so you guys are comfortable with each other and you won't step on each other's to, but you can interact a little bit and, and I'll throw some stuff in, but let's start with the Maryland specific stuff. First of all, flood insurance. Why do we care? You know, Maryland is a small state. Yeah, we have water, but I don't think people understand how unique Maryland is with the, the amount of coastline for a very small state. I mean, just look at our map and see it, obviously the Chesapeake bay, which is actually, as you said, in estuary, the largest in north America or largest estuary, at least in north America. But anyway, we have by at least one measure and there are several, uh, over 3000 miles of coastline. And clearly we have opportunities for flooding, especially with potentially rising water levels, sea levels, and the bay as well. Just go to Annapolis.<laugh> at high tide on a full moon, see, you know, the cons of flooding that can occur. So I obviously, this is a huge issue for Maryland. It's very important for us in Maryland. And so give us a little bit of an update and a kind of a brief overview of the program from your perspective and why it's important. And then we'll get into specifically how this affects real estate transactions and realtor members and what they need to know and how to interact with consumers regarding flood insurance.
Speaker 2:Sure. I'd be glad to. So as you pointed out, the national flood insurance program started in 1968, you know, and there was a growing need to establish a flood plain management program that wasn't led by the federal government, but was actually led by I the local government. And, and one of the things I like to do before I start is just to define terms. So first of all, my office, uh, our office, Maryland department of the environment, we're the state coordinating office for the national flood insurance program. So we're kind of the go between the federal government and the community, which is a term I wanna define because when we say community and government land, we're really talking about local governments that have land use authority. So think Baltimore city think Arundel county think the town of Oxford, all these governments have the ability to adopt codes and ordinances and enforce those codes and ordinances. So FEMA, through the establishment of the national flood insurance program, they produce these maps, these flood insurance rate maps, and they evaluate risk. And the standard for the longest time has been the 100 year flood. But let's stop saying that, you know, let's stop using that. What you said earlier, Chuck, you said special flood hazard area as that's a, a good way of describing it. But even that is kind of misleading because it, it makes people believe that we only flood in those designated areas drawn by FEMA. But what we're seeing is things are changing out there. As you mentioned, Maryland has a lot of shoreline. We, we are called America in miniature, in fact, so our geology is very unique. We have the Appalachian mountains in Western, Maryland, out where I live all the way to our shorelines and our beaches in beautiful ocean city. So everywhere in between, we have every ti kind of flood risk that you can possibly imagine. We have riverine flooding, we have flash flooding, we have high tide events, which we just saw this late October. Yeah. It caused some serious levels of flooding that that was very close to Isabel from 2003. So how do you manage all that risk? And we can't do that really at the federal or state level. It has to be done through local government and working with them. So part of my job is working with those communities. I E local governments, helping them to implement these flood plain management standards. So as they yielding permits in and they screen these permit applications, if you're in one of those risky areas, you're gonna apply certain standards. So there's a method that, to the madness behind all this stuff, but, but it's, it's important because what we're trying to do is reduce risk. And, and while we have an educated guess of where that risk is, we're quickly realizing that the risk is expanding beyond those boundaries. Yeah. So let's get away from the, the notion of being in or out of the flood pool plane. I always say that everyone is in a flood plane. It's just a matter of what level of flood risk you are. Are you high? Are you moderate or are you low?
Speaker 1:That's a good way of looking at it. And I think one of the, one of the frustrations that our members report to us on a regular basis is the, the map, the mapping, you know, and where is that line? Everybody looks for the dotted line, you know, on their plat and, and or their survey, see if they need flood insurance. And right. So there's a little bit of a myth about that. So I want you to talk a little bit about mandatory versus, you know sure. Voluntary, but specifically, what is the mapping? What are, what are we doing and how do we bring that conversation to the table specifically for our members in terms of with a buyer of a property says, do you know, am I in a flood plain? And do I need flood insurance? And how much is that gonna cost? How do a real estate professional begin to give information to a consumer? So the con the perspective buyer can answer those questions.
Speaker 2:Yeah. And I'll, I'll start the response to that question. And, and, you know, certainly ask rich to, to jump in and add to it, cause I'm sure I'm gonna forget something. Our department has been very active in assisting FEMA in updating the flood insurance rate maps from one end of the state to the other. And it's not a perfect science. And again, we, we established a national standard of the 100 year flood, plain. So that's, that's the line we use for that mandatory purchase requirement for flood plain management purposes, but many communities, as I defined earlier, they're going beyond that line. They're looking and, and saying, well, you know, we, we know it floods over in this area, even though it's not shown maps, so we're gonna implement some standards there. But the flood insurance rate map, I is inherently wrong almost the day that it's printed, because things are constantly changing out there. Unfortunately, a program like the national flood insurance program, and FEMA can't adapt as quickly to these changing conditions through a mapping sort of program. So enter in risk grading to 2.0, that is going to really kind of change how a lot of that happens. So I would say that, you know, yeah, we, we kind of start with the flood insurance rate map because that's what we use for insurance purposes. So if somebody like a owner buys a home, if you're like me, the average Joe, you're gonna have to go to the bank and ask to borrow some money. And as part of condition of borrowing that money, if your home that you're interested in purchasing is in a high risk area, also called the special flood hazard area, then you're gonna be required to carry flood insurance as a condition of your loan. So that's the mandatory purchase requirement that we often talk about.
Speaker 1:Right. We have always said that even if you're not in a mandatory zone, you still need flood insurance.<laugh>
Speaker 2:Absolutely. Yeah. So I've even looked into it for my own personal, um, you know, property that I have out in Frostburg. I'm at 2200 feet in elevation. So nowhere near a flood zone mm-hmm<affirmative>, but you know what? I've seen water run off of mountains before. So anybody could really flood, you know, and I heard someone from FEMA a long time ago, say if you can see it, smell it or taste it, I guess, from saltwater air salt air you're, you're probably near flooding or a flood plain, and you should probably get insurance.
Speaker 1:What other advice can we give to our members in terms of trying to be a resource of information? First of all, to our members, let, let me, as CEO of Maryland realtors reiterate a position that we have had for many, many years regarding all of these kinds of con property condition, disclosure, and issues, and our responsibilities to our clients. And so the first message that I wanna give to our members is we are not experts. We have Kevin and rich they're the experts we are not. And so what we want our members to be able to do is be a source of information, not advice. We don't give advice, we don't give legal advice. We don't give advice on inspections or any of those kinds of things, but we do wanna be a resource for in of information so that when a buyer says, Hey, this is near water, uh, am I gonna be require to purchase flood insurance? Or should I anyway, where is the best place to send them for information?
Speaker 2:Yeah. Thank you. And, and rich, I'm sorry. You keep getting pushed to the side here. So feel free to jump in
Speaker 1:<laugh>. Well, is Kevin a,
Speaker 2:Because our office has been so involved on the mapping side of it, and there's a couple different, great resources that anybody can go to first and foremost, you know, FEMA does have the map service center. So FEMA msc.gov, I think it is. But if you Google FEMA map service center, that link that pops up and anybody can punch in or address pull up the maps, interact ability to access the FEMA data has gotten so much better over the last 10 years used to be very clunky. They've done a great job in Maryland. We have the Maryland flood risk application. So if you go to MD flood maps, dot net, that's MD, flood maps.net, we also have a flood risk application on there where you can click on a map viewer type in your address and get a sense for where your property is in relation in relation to one of these FEMA designated areas. But one of the other neat things that we're trying to do is to connect with other data sources. So we, we do have some storm surge inundation area. We have some sea level, raw eyes, inundation levels with future predictions on there. So if you're near the coast or you can even pull in other data sources, there's an ability to do that. But so we have those two templates through FEMA map service center and Maryland SL risk application that you can immediately go to, but I'll tell you what realtor.com and some other sources like that have actually started making this information available in a different way. And now we're gonna probably lead to this with risk rating 2.0, but we're trying to get beyond the FEMA flood plain. And what they're doing on realtor.com is they're connecting with a data organization or an organization called flood factor. So it's the first street foundation that has developed this data set. So unlike FEMA, uh, first street is looking more into the future. What could things look like? You know, what are things happening? You know, what, what topographical changes that maybe we need to add to the mix and culverts and things like that. So they're trying to do more predictive of where flooding could go and I've kind of poked around on, you know, different areas in Maryland and been very impressed with, uh, that day data that they have on realtor.com. I think it's also available on Redfin and maybe another source, but you can also go to flood factor to, to, to kind of poke around, but there's kind of like a difference between what's required versus what we can maybe prepare for. And, and I would say that those other types of sources might help us prepare, even if we aren't required to carry flood insurance or do certain things. Yeah.
Speaker 1:We, we always recommend realtor.com. Of course<laugh>, uh, and factor is right up to the FEMA FH mapping right there at the property description. You'll see FEMA and then flood factor, which again, as you said, takes other things into consideration, sea level rise and things like that. And, and I, I came a gis.com. I'm not sure where I got this from where, well, I don't know where I landed on this, whether that was from FEMA's website or not, but it's a, it's a projected premium changes by state. You guys a yeah,
Speaker 2:I, I think what you might be referring to Chuck is the association of state flood plain manager set up a app viewer, and they, they tried to do a little bit more in depth analysis of how the risk rating 2.0 impacts are gonna be affecting various states mm-hmm<affirmative>. So we have somewhat of an idea. Um, the regional office has been great to work with they've done. They have GI GIS analysts there that have worked with the data and kind of dug into the census track to see where changes will be happening throughout our state. And if you're ready to dive into that part of the conversation, now, we can say that based on the data that the regional office has provided us, we're gonna see some of the biggest increases in ocean city. Mm-hmm<affirmative>, we're gonna see some of the bigger increases in Berlin. And I suspect the Berlin area might, might be ocean Pines. They don't know that for a hundred percent, but there's a large residential area community there in ocean Pines. And interestingly, those two areas are also gonna see the biggest decreases. So we're gonna go from one end of the scale to the other, but they're not the only ones that are gonna to be impacted. There are also many others, and there are some lower income areas that, you know, we're really concerned about places like Baltimore city and prince George's county, that, you know, people are gonna see some, some changes to their premiums. Some, some might be very positive overall risk ratings gonna serve Maryland very well. I think it's 63 per percent, I think is what the statistic was, is our, something like that. Our policy holders are gonna see an immediate decrease. Yeah. And you know, so that remaining amount is gonna see some kind of a increase, whether it's a$10 a month or a 20 or, or more, but, you know, I I'm most concerned about the lower income areas, places where affordability is an issue. So we're trying to figure out a good way of connecting with those communities and trying to help them. Let's so rich.
Speaker 1:Yeah. That's a good segue. So rich, tell us, give us the, the intro, you know, the bullet points or risk rating 2.0, what are the takeaways for realtors who really need to be the source of information for people that need to basic understanding of what's at stake? What, what is she changed as of October 1st up until the April 22 date, I guess, which is physic fully implemented, then you know, that kind of thing. And then we can talk a little specifically about what specific properties or, or areas what they can expect, either current policy holders or new buyers of properties, what they can expect.
Speaker 3:Sure. And, and thanks again, Chuck, back to the, uh, topic of resources for agents, but also for the general public www.floodsmartfloodsmart.gov. If you can just remember that website, that website in turn into all manner of topics related to flood insurance, the national flood insurance program, how to buy flood insurance, uh, what flood insurance covers just, uh, almost an endless list of things that, uh, people will find helpful, but, uh, uh, in terms of risk rating, 2.0, it's important to remember. And Kevin mentioned it before for this program's been around since 1968, the rating method that we have been using has been around since about the seventies. And if you think about that, uh, what, what did your car look like back in the 1970s? What did your phone look like back in the 1970s, serviceable enough, but, uh, technology has come a long way. We're taking a of that technology and, uh, information that's available out in the marketplace to make sure that our rates are fair and accurate. Kevin mentioned before that some rates will be going up. Some rates will be going down. Both of those are true. Now, what that tells you really is that our current rating is not all that accurate, and that is unfortunately the case. So, uh, we're taking steps to improve our accuracy. The, uh, flood insurance product will, of course, uh, continue. We are working with our partners in Congress to make improvements in the program. And one of the things that we're looking at of course is the whole concept of affordability. How much should people be paying for flood insurance? And, uh, we've always based that on the maps, we've always based that on the zones, but again, that's relatively inaccurate. So risk rating, 2.20, or other things it's going to take advantage of geo location. We are actually going to change from a rating system where it's done by zone. It's done by class to a rating system. That's done individually for any structure that we are looking to ensure that we can base our rates individually on that structure where it's located. What's the distance tool, water source. What's the elevation of that structure. What's the elevation of the surrounding area, et cetera, et cetera. How far is it the, the nearest water source and, uh, uh, given all those rating variables along with a whole number of others, we can come up with rates that are much more appropriate for each individual structure. Another reason for risk rating, 2.0 really is to correct one of the, uh, problems that have grown up over time. There are people who own certain structures, the older structures for the most part in high risk areas that have actually been subsidizing to a degree, the owners of newer, larger, more expensive structures. It's all about the replacement cost value of the structure and a replacement cost value really will dictate what premiums should be. And as you can understand, a smaller, less expensive structure should cost less to ensure than any larger, more expensive one, but the way our rates work right now, if they owners of those two structures would to buy the same exact level of coverage, they would be paying the same exact level of premium. So risk rating 2.0 by taking into account replacement cost value is going to correct that inequity. And there are a number of other issues going on risk rating, 2.0, as you mentioned, I believe it's already started up. We've got already tens of thousands of policies that are, uh, written success. We under risk rating 2.0, we will begin converting our existing book of business April 1st of next year. And one of the most important things that your clients and your agents need to know is that it's so much easier to get a quote on the cost of flood insurance. Now, the way we've always done things, it was nearly impossible to get a cost of flood insurance. I'm sure a lot of your agents are familiar with situations where their clients have gone through several different sources to obtain a quote for flood insurance. And that's several different costs based on the same structure. And so we're taking a lot of the confusion out of it. All of the agents who are writing foot insurance in the future will be using the same rating engine and they'll have access to that. And just some simple questions to be answered by the property owner, along with the geo location process, that's involved in risk rating 2.0 will make the whole process quicker, easier, and not subject to all of the delays that, uh, I'm sure your agents have seen in the
Speaker 2:Past. And Chuck, if I may just put that in perspective a little bit, uh, for Maryland, anybody can go on FEMA's website. In fact, Google risk rating, 2.0, you can get tons of information. You can get profiles. And I was just gonna give you a quick summary of Maryland's profile. So we have about 65,000 N F I P policies in force. So I know we're gonna talk about private insurance in a bit, but these are the policies that we're aware of. We have 65,000 of them through the N F I P. So 61%, I, I said three by mistake earlier it's 61% or almost 40,000 policies are gonna see an immediate decrease. And, and then you get into varying degrees of increases with the others. But, uh, 23,000 of those policies will see on average, a zero to$10 per month increase. This is how FEMA breaks it out in their profiles. And then 2% are going to see that's about 1,355 policies are gonna see an average of 10 to$20 per month increase. And then only 624, that 1% will see an average, uh, increase of, uh, more than 20,$20 per month. So yeah, some people are going to see some increase, but I think in all, I think the program's gonna be kind of balanced out a little bit. You know, people have maybe been paying more than they should have, and maybe some people haven't been paying enough. So FEMA's gonna be looking at a variety of other data sources like distance to coast, which is a very big one. It's it's no longer based on the flood insurance rate map. They're gonna actually use the other criteria other than the actual map itself to rate the policy. So, you know, things like having a home elevated on pilings peers and posts can give you a mitigation credit. Doesn't matter if you're in a special flood hazard area or not, but if you're fairly close to a flood source, if your home is elevated on one of those types of foundations that could give you a discount. Another thing which I know we talked about many times, the trainings we've done with you are these things called flood openings. You know, so any kind of enclosures below an elevated floor, uh, really need to have flood openings if you're in a high risk flood hazard area, but you can also get some credit for that, even if you're not in a designated flood zone. So just again, depends on, on distance to coast. And the other kind of credit you could get is elevation of machinery and equipment. So think your electrical mechanical systems think about that exterior HVAC unit. That's often on the ground, let's start putting those things up on platforms. Let's start elevating them as we do renovation projects. So even if you aren't in these FEMA designated flood Plains on the flood insurance rate maps, if other data sources, uh, are, are saying that, Hey, you still live in a somewhat risky area. That's something that we can start thinking about as we do renovation projects and things like that.
Speaker 1:Yeah. Yeah. And that, that actually raises a point in my head too, because our members are very familiar with property and casualty insurance and the clue report. So we always, they always say, you know, make sure cuz we've all heard horror stories where buyers, especially don't know there was a claim on a particular house of fire damage or something, and that's not necessarily disclosable. Uh, and, and actually in, in worst case, I've only heard this one time in 15 years, but the, their homeowners, their homeowners insurance premium, would've been so much higher than they thought it was be. And they just qualified for that mortgage by the sign of their teeth. And they actually, we became unqualified for that mortgage because their homeowner's insurance company pulled up the clue report and that increased their premium because of the pre previous losses on that property. Even though they didn't own it at the time. Am I right that to set flood rates prior losses are not included in the determination risk or am I, am I wrong about that?
Speaker 3:That's that is true. Chuck, the availability of information when you're talking about a federal source gets a little problematical, there's a concept called personally identifiable information or PII mm-hmm<affirmative>. And a lot of people will be very concerned about your uncle Sam collecting data on them and, and sharing it with others. So one of the things that we hold very closely is prior loss history on a structure, uh, the current owner of that structure has of course the right to know what the prior loss history is. Any, uh, any potential buyer would have to go through the current owner, uh, to get that information. We are working on that as well and hopefully somewhere and not to distant future. The availability of the information on prior losses for a structure will be increased over what it is right now. We, we are not part of the clue system, but hopefully in the future, we will be
Speaker 1:Do the, uh, I guess the talk about a little bit about the rate cap, is that the, is that
Speaker 3:Sure, absolutely. What we're, what we're talking about rates, uh, Kevin mentioned before that, uh, there are premiums that will be increasing premiums that will be decreasing and that's as opposed to the way, uh, we're currently doing things. No one has ever seen a premium increase or decrease rather, uh, through the national flood insurance program, the average premium goes up about$8 per month. Uh, and again, that's across our entire nation 5 million policies and force. So the institution of, uh, reating 2.0 and it's accuracy of rates will result in those instances where we need to decrease premiums and decrease them significantly. And that is going to happen a lot in Maryland, as Kevin mentioned before.
Speaker 1:So the rate cap is it's what is
Speaker 3:The cap? Oh yeah, let me get to the rate cap, uh, Congress sometime back, uh, instituted, uh, limit on how much premiums can increase annual wooly. And currently that increase is 18% annually, right? And in reality, over the years, we've never come anywhere close to instituting an 18% annual increase yet typically been between five and 10%. And I don't see us going different anytime in the future, because one of the things we do and have been doing for a while we're as concerned about affordability as everyone else. And so we try to keep whatever rate changes that have occurred in the past, do a fairly limited amount and we'll continue to do that in the future. But, uh, one of the things that Congress is discussing is actually reducing the annual premium cap, uh, down to 9%. And, uh, we, we would be very happy if that were to occur.
Speaker 1:The, some commentators have suggested that the rate cap is a functional equivalent of a subsidy. Let's get real here. And our members, you know, we have, uh, and throughout the country there, one under relying criticism of the program is that taxpayers are subsidizing wealthy property owners, you know, waterfront properties who are paying less than market rate and taxpayers are on the hook for 50% of the claims or whatever that number is. And the program's in debt that it can never repay. And, you know, we know that fully market rates are probably unaffordable for most people and we subsidize other things. I'm, I'm, I'm not an advocate on, I don't have a position here cuz certainly we, we subsidize stuff all the time, including home ownership.<laugh> um, uh, not so much anymore with the home interest deduction, but so we're obviously not opposed to that, but what are the policy implications for that? And are we ever gonna get to a fully actally sound program or is it just ever, could never really price policies that people can afford to for the full measure of protection they need?
Speaker 3:Sure. And uh, let me start off with the perception that we are subsidizing wealthy property owners, long coastal areas. Kevin mentioned, uh, before the way the program really works, uh, which is all about mapping, about insurance and about flood plain management, uh, and in coastal areas, coastal areas have the highest standards for construction for reconstruction and those structures because of those higher standards that are actually much safer than most inland structures are, even though they're located along the coast. Another one keep in mind about the national furniture program. Coastal property owners tend to be in the hundreds of thousands, if not millions of dollars. And most of them quite honestly go to private sources of what insurance we are maxing out our coverages for individual single family structure at$250,000. That's what I was getting at.
Speaker 1:Thank you. Yeah, no,
Speaker 3:No, no. Nowhere near the actual value of these structures. So as I say, uh, the, the type of construction that occurs in the coastal areas tends to be more safer than, uh, the, the inland areas, premiums that are paid in those coastal areas are actually commensurate with the risk. So those are indeed some of the highest premium that we have in the program. But interestingly enough, the true coastal area is the ones we call V as in victory zones, real high hazard areas. Only about half of, 1% of our book of business is located in the V zones. So we don't have a heck of a lot of exposure out there. And, uh, uh, therefore we're really concentrating under, uh, what you and I would consider to be much more typical development in the inland areas. And as I say, even in those coastal areas, uh, the construction requirements, uh, are, are such that, uh, certainly are not subsidizing anybody who's in a coastal area.
Speaker 1:Yeah. And I think a lot of that is, is a, this can inception and, and, and a difficulty wrapping our heads around, even the differences between the N F I P direct and the right your own. So could talk a little bit about the interaction between the N F I P or the direct, uh, insurance products and the private market product X that, and a lot of our members and a lot of people in real estate and in other industries and, and especially in Congress as you follow, cause we're obviously extremely active on Capitol hill, our, our advocacy efforts at the national level, uh, in including getting the extension, because this will air after December 3rd, but currently schedule to expire again again, right, right. Summer third. So hopefully they'll be, uh, at least, uh, what the, what the 12th or 13th short term, uh, extension. So we're kind of, everybody wants permanent fix and we still haven't been able to, to get that, but so explain a little bit, and you certainly have the, the free market types. You know, I put that air quotes for our members. I don't know why I did that, cuz it's an audio recording. I dunno why it's air quotes just around that, but we have,<laugh> sorry, but we have, we have the free market people who say, you know, the government shouldn't be doing this at all. Like, but let the market there, there is a, well talk about that. How is that development more robust now than it was just a few years ago? So how is the private sector? How is the market and the insurance companies, private insurance companies, how are they interacting with the N F I P direct? And, and what kind of information should our members give prospective buyers of insurance, how to navigate
Speaker 3:Those choices? Sure, absolutely. Just to give you some perspective, the, uh, reason that national flood insurance program was created was that private industry exited the market, right? There was no flood insurance available back in the sixties from any source at all at any price, simply did the out exists. So, uh, Congress appropriately created this program of insurance to make foot insurance available again. And over the years, especially recently, private sources of insurance have been growing, can go out online now and get the quotation from any number of a different sources and our philosophy, our position on private insurance. Great. As long as a person has property, the flood insurance, whether it's through us, whether it's through the private sources, wherever they get it from sad fact is the penetration of flood insurance is extremely low, even in the highest risk areas of the country, about three out of 10 carry insurance, which means that seven of 10 don't. Uh, so again, we're, we're happy for, uh, uh, the additional opportunity for people to buy coverages. What we strongly suggest, however, is make sure, you know, what you're buying. It's not necessarily an apples to apples comparison. Private industry has the right to use its own rules, regulations, language. And in some cases not quite up to par with flood insurance, through the N F I P in other cases, it actually exceeds our coverages. So it's really all about making sure that the buyer is informed about what it is they're purchasing. And to do that, we say, it's your insurance agent. It should be your best source of information, no matter what your insurance needs are, but especially for flood insurance, uh, since it's a, a, a pretty, uh, difficult line of insurance to write and to understand, uh, the tools that we're giving insurance agents now to risk rating 2.0, make it so much easier for them to write it and to explain it. So we've taken a lot of the fear out of the flood insurance writing process for insurance agents. And I see that continuing in the future, private markets obviously have made the whole process much easier. Those who are, uh, writing flood insurance and someday, hopefully in the not too distant future will be going on online as well. And allowing people to enter in their own information to obtain a quote on fraud insurance. But it's important to know that every policy that we've ever sold and that we will ever sell has to be written through a licensed insurance agent in the state where that property is located. So it's all about the education and licensing for, for the individual agents. And of course we supplement their education through a number of different various training programs. And there's an awful lot of information out there on the, the websites for that as well. Yeah, I think, uh, rich gave some really solid advice. I mean, you want the buyer to be
Speaker 2:Informed, know what, what know what you're purchasing and things are very transparent with the national flood insurance program, although it's kind of clunky and bulky. I mean, there are sources where you can go and you can understand exactly how your policy is being written. There's a rating process for that risk rating. 2.0 is something new that we're learning. And, you know, there's some, some additional, you know, things behind a curtain there that, that we're gonna get access to. But for the most part, the N F I P is just very transparent. So the private market is, is certainly there. And, and like rich says, I mean, from our perspective, the state, you know, we, we don't care where you get your flood insurance. We just want you to be covered. You
Speaker 3:Are in terms of, uh, flood insurance and, uh, our, our position on flood insurance. Uh, one of the important reasons to carry flood insurance forces, what happens if you don't have it, we've, uh, seen any number of flooding events where those people who did not have flood insurance, uh, were forced to, uh, yeah, we're forced to take out significant loans just to begin to rebuild their lives. Uh, we all know that there are, uh, disaster assistance sources that are available out there, but those, uh, disaster assistance funds only become available when there is a presidential disaster declaration, which of course does not happen, uh, in response to every flooding event. But even when it does happen, uh, the, of, uh, grant that, uh, the average property owner can have, uh, in, uh, I, I don't have any Maryland examples, unfortunately at the tip of my tongue, but I do know that, uh, uh, down in Virginia, back in 2016, hurricane Matthew, uh, affected the coastal areas very significantly. Uh, the average payout through the national flood insurance program, uh, was$35,000. Uh, the average grant available was$4,000. And you can understand$4,000 not going to go very far in terms of putting your life back together. So, uh, you know, we really encourage people if you're not going to buy flood insurance or any type of insurance, just make sure you thought about where you're going to get the money if you absolutely need it. Yeah.
Speaker 2:That's a good point. Kevin, you wanna finish your thought? Yeah. Sorry. I don't know what happened there. Um, but you know, I was just kind of reinforcing what rich was saying about the private market and just understand what you're buying and making sure that it meets any kind of lender requirements. But I also want to go back to like risk grading, 2.0, and that FEMA website that I had mentioned earlier again, there's a great, uh, Maryland profile there that kind of provides a nice summary. Maybe we can get that out to membership somehow, but they, they also did like a more in-depth analysis. So they're highlighting that there's 2.1 million properties out there that are not covered by the N F I P we hope a slug of them are covered by the private market, but we suspect it's probably not a large percentage either. And, and then they also say that the average N F I P claim payout in Maryland in the past 10 years is about$15,000. And then rich was saying, you know, after a disaster, after the big flood happens, it's gotta meet certain criteria to be declared. And it opens the doors to other things. But in this profile, it says that, um, the average individual assistance claim payout in the past 10 years was only$3,500. So again, these individual assistance after the large declarations, these big disasters, they're, they're not meant to put you back where you were. They're not meant to really help you rebuild. It's just kind of to help you get on your feet, maybe help with some housing. Um, but some kind of insurance is going to be the tool that you're gonna really need to help you recover faster.
Speaker 3:I just want to, uh, add to a, what Kevin said before is absolutely correct. Uh, national fund insurance program, and any federal program tends to be kind of clunky. Uh, but, uh, uh, one thing you can count on is we're around we're, we're going to be here. It's easy enough to find us, uh, and you've out of, uh, lots of sources. If you have issues with us, uh, whether it be your elected officials or what have you. Uh, the thing to keep in mind about the private source is, is, uh, they can come and go into any particular market, uh, based on their own business needs. So I have seen some situations in the past where a significant flooding event and a, and a specific geographical area did lead to some of the private insurers withdrawing from the market.
Speaker 2:Yeah, that's, that's important. And I've heard Chuck from some of our agents out there, uh, insurance, um, producers, we mm-hmm,<affirmative> joy hatchet with the Maryland insurance administration. She always corrects me cause I gotta say producer<laugh>,
Speaker 1:But Joyce,
Speaker 2:But our producers out there, um, they've kind of told me that, you know what, we're, we're selling more private flood insurance and we can give a better rate through private than we can through the N F I P. So, you know, there are people out there that are, you know, heading in that direction. Yeah,
Speaker 1:That's important. And I wanted to point out, we have, as, you know, had several put on several programs and the coordination and the collaborate between Maryland department of the environment and the Maryland insurance administration is really a model for cooperating across agencies. Government gets a bad rap on many occasions for the left hand, not knowing what the right hand is doing. It rightfully so deservedly. So on some occasions at least, but when we do it right, I think, I think we should all take note and the collaboration, the amount of work you guys have done together, MDE and Mia, uh, is really a, again, a model. And, and we, we do appreciate it and, and we've enjoyed our,
Speaker 2:Our thank you for pointing that out. I, I can't take any credit. I'm gonna point back the joy and the Maryland insurance administration on that. And in fact, I'm, I'm a little nervous because I owe her something at the end of the day and I'm hoping I can get it to her. Otherwise I don't wanna be in trouble, so right.
Speaker 1:We're wrapping up here, but<laugh>,
Speaker 3:She'll come for you too. You know, she will.
Speaker 1:Um, I just, one thing I wanted to point out and that's disclosure start started the very early talking about, you know, how a buyer would know for example. And, and one thing that Maryland has, we have a disclosure, disclaimer, law and sellers are required to provide this form most sellers to buyers. Now, if they dis claim, they all, they have to do say, you know, we don't have anything to disclose. They still have to disclose latent defects. But if they do, if, if a seller does fill out the real estate disclosure form, question 17 does talk about flood and flood insurance. And so buyers at that point, getting that form from the sellers would be aware of the fact that at least there, if there was a flooding event, they would know about it. And then they can ask the questions about insurance and, and, and go from there. So buyers are not without any resources
Speaker 2:Or any. And there's also another question on that form. Uh, Chuck about exterior drainage. It asks if water stands on property for more than 20 hours,
Speaker 1:It is that's right. That's true. That's true.
Speaker 3:Um, the, uh, importance of disclosure, I think it's important to know what has happened in the past, but as we see conditions changing in the future, future conditions are gonna be a lot of what drives flood insurance and really the history of development. I think, uh, in the future for this program, we see, I think risk rating 2.0 because of technology that's used in it, give property owners a much clearer picture of what risks they will be facing in the future and in the future, uh, is really what's important for any existing property owner. Really not what happened in the past.
Speaker 1:Yeah, absolutely. Yeah. That's a good point, Kevin and final thought
Speaker 2:Again, thank you for the opportunity Chuck and Maryland realtors. Uh, you, you all have just been great to work with. We enjoy the workshops and presentations that we've done together of the years. And I look forward to, to doing that again, I hopefully soon in person, um, but we're here as a resource. We're glad to help producers and real estate agents and engineers, architects, local government, whoever, you know, we have a variety of stakeholders. And, um, so, you know, feel free to contact me. My email address is Kevin dot Wagner, maryland.gov. Again, Kevin dot Wagner, maryland.gov. And I'm, I'm just happy to try to help. I get emails all the time from agents, uh, saying, you know, what's going on here? How can you help me there? And sometimes I can help. And sometimes I can't, but, uh, we do try to, to, to be that resource.
Speaker 1:Great. Thanks. Find a word rich.
Speaker 3:Yep. Finally, uh, uh, risk rating 2.0 has been in development for over five years. So it's, there's a lot of work, a lot of planning. That's gone into it, lot of testing, that's gone into it. And, uh, considering the magnitude of change, uh, in, in the size of the program, uh, as we've gone through the implementation process, we've run into very few problems and I'm pretty sure that, uh, that's going to continue on in the future. Yes, it's a government program. Yes.
Speaker 2:Uh, there'll be some glitches, uh, but we are very good at learning lessons and, uh, not being afraid to admit our mistakes and correct them
Speaker 1:And, and it will evolve. I think that's the important point that, you know, this really needs a good five to 10 years before we really have an idea about whether it's working or not seems to be just given the scale of the thing. I think you're right. That I think what some people probably don't understand. So hopefully that gives, that gives a
Speaker 2:Little perspective. Chuck, I don't know if we talked about dates with risk rating 2.0, so it, it, it started, it kicked off this past October for, um, for new policies, right. But existing policies it's going to kick in, uh, come April for of 2022. Right. And then rich reminded me that these, uh, I think it's 45 day letters are sent prior to that. So they'd probably go out in the February timeframe that people are gonna start okay. Hearing about this stuff. So oh, good to know. Yeah. We imagine we're all gonna get more questions about it. And as we learn more, we can share more. Right. Um, but you know, be on the lookout for those of letters coming. Okay. That
Speaker 1:Would be a good time maybe to have a webinar of some kind where we could do interactive, maybe take questions from members and stuff like that. So I'll try to get that on the calendar.
Speaker 2:That'd be great. And absolutely while we have, we have this organization in Maryland called the Maryland resiliency partnership. It's a collaboration of mm-hmm,<affirmative> many different agencies and, um, nonprofits. And it's really, the focus is, is to reduce flood risk out there to help help people share resources, leverage funding, and all kinds of things. But last this past year, we kicked off flood awareness month in April mm-hmm<affirmative>. And we are gearing up to do that again in April of 2022. So it would be great for Maryland realtors and all your member to be a part of that, uh, to share information with your, your buyers, your sellers, uh, on your websites. Perfect. Uh, together, I think we could really, uh, you know, collaborate and have some strong messaging. Great.
Speaker 1:Great. Well, thank you guys. Really do appreciate sharing your time and expertise with us and to our listeners. Thank you for the hooch of your time. Again, this is get real estate, the Maryland realtors podcast. I'm Chuck Caskey, Maryland realtors, CEO. Thanks as always to our esteem producer, Joshua Woodson, please subscribe wherever you get your podcast like us, share us, give us five stars. If we've earned the, and give us feedback. Most importantly, including guests, you'd like us to invite or topics to explore today. I'd like to leave you with the imortal words of Julian, of Norwich all as well and all shall be well. And all manner of things shall be well, take care.
