Subsidized policies are those that are not paying the full actuarial rate based on what is considered the true flood risk. Homes that typically have those policies were built in high-risk flood zones before the first flood insurance rate map went into effect in Dec. 31, 1974, and haven't been substantially damaged, according to FEMA.
It's not just residences on the beaches that are affected. The changes will affect homes in high-risk flood zones in northwest Bradenton, those near Wares Creek and Cedar Hammock and in low-lying areas in East Manatee. Businesses with subsidized premiums will also see a 25 percent annual increase until the rate is reached, affecting 10,964 businesses in the state.
Sue and John Johnson are Lazaroff's neighbors on Avenue C, where their home, built in 1957, is one of the pre-flood map homes. They didn't even know their flood insurance policy was part of the National Flood Insurance Program until they examined their renewal bill from May with the Herald.
Attached was a letter from Hartford Insurance Co., explaining that the Johnsons will be receiving more information about changes in the flood insurance program -- but no mention that their rates are going to go up because of the federal flood insurance reform act. Instead, an educational packet from FEMA is attached that describes the changes, but doesn't say how the Johnsons will be affected.
"We're retired, and we're on fixed income now, and what little we got, we don't need pushed out the door if we can help it," John Johnson said.
The couple has options, unlike others in this situation. The mortgage is paid off, and they never had to make a flood insurance claim, so they can risk not carrying flood insurance, the couple said. The worst flooding they experienced was during the "No Name Storm" of 1993, which brought water up close to their porch, but the home didn't sustain any damage, John Johnson said. The retirees own two other homes, one in north Florida and another in North Carolina that they can go to if anything ever happens to their Holmes Beach residence.
"We got it covered for floods," said Sue Johnson, laughing.
Realtors are scrambling to make sense of it all, too.
"I don't think necessarily all the Realtors have a handle on that yet," said Linda Formella, a Realtor with Keller Williams in Manatee County.
Florida Realtors, their statewide association, is keeping a close watch on the changes. President Dean Asher met with the governor's cabinet last week to urge his office to lobby Congress to stop the law from taking effect any further. Seasonal homeowners saw the first of their rate increases starting this year in January.
"We believe the reforms will have a detrimental impact on the entire economy of Florida, including existing homeowners and those who want to buy Florida's properties," Asher told the governor's cabinet, which includes Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater and Commissioner of Agriculture Adam Putnam.
"Most sections of the bill relating to rate changes have what you and I would call a 'glidepath' or 'phase in' to actuarial soundness -- similar to what we have done successfully here in Florida with Citizens Property Insurance Corporation," Asher said. "Where there is not a glidepath specified in the flood reform act is for the new homebuyer.
"This reform measure will, in effect, lock current homeowners into their property," he predicted. "Homeowners won't be able to sell because no one will be able to afford to buy after they learn what the flood insurance premium will be."