Flood-coverage gains slow to trickle

BELOW WATER: Shanix Technology owner Kehin Shah holds photos of the damage in his Cranston office caused by the March 2010 floods. Like many small-business owners at the time, Shah did not have flood coverage. / PBN PHOTO/RUPERT WHITELEY
BELOW WATER: Shanix Technology owner Kehin Shah holds photos of the damage in his Cranston office caused by the March 2010 floods. Like many small-business owners at the time, Shah did not have flood coverage. / PBN PHOTO/RUPERT WHITELEY

After hundreds of homes and businesses were inundated by the rain-swollen Pawtuxet River two years ago, insurance agent Jean Martinelli thought demand for flood insurance from some of his neighbors in Cranston and Warwick might rise like the water had.
Not exactly.
“They’re not taking it out – unless the bank and the federal government make them do it,” said Martinelli, owner of Jean Martin Insurance on Reservoir Avenue in Cranston.
“I have a client on Scarborough Beach [Narragansett] whose house was swept away by the Hurricane of ’38, rebuilt in the same spot, and doesn’t have [flood insurance],” Martinelli said. “I have a commercial client, in automotive, on Elmwood Avenue in Warwick and every single time there is a major storm he is flooded. He only has $25,000 in coverage and every time he is wiped out. If I was him, I would be getting more coverage.”
Prompted by millions of dollars in losses across the state in March 2010, many Rhode Island home and business owners have since taken out flood-insurance policies or increased the coverage of their existing policies.
But the amount of new policies attributable to the floods, which put streets underwater from the western edge of Providence to Westerly, has been modest and the latest figures show those increases are tapering off now that fair weather has returned.
At the start of February 2010, just before the floods, Rhode Islanders held 15,172 flood-insurance policies, according to the Federal Emergency Management Agency’s National Flood Insurance Program, the country’s sole flood insurer.
A year later, the number of policies rose 4 percent to 15,769. At the start of this February, there were 16,246 policies, a 3 percent increase over the previous year.
Although emergency-management officials can point to 1,074 new flood-insurance policies written in the state since the floods, insurance coverage had already been on a slow, upward trajectory for years. There was a 2.7 percent increase in policies between 2007 and 2010. And for many of the Rhode Island property owners newly covered for floods, the decision to get insurance was made for them as a condition of accepting federal disaster assistance.
Indeed, for most property owners, the decision to get flood insurance is not entirely voluntary.
All federally backed mortgages for properties within a floodplain require flood insurance and banks often won’t make loans on properties in flood zones that don’t have coverage.
There are roughly 500,000 homes and businesses in Rhode Island overall, so the 16,246 buildings with flood-insurance policies is 3.2 percent of the total.
“Generally speaking, there hasn’t been a mad rush,” said Mark Male, executive vice president of the Independent Insurance Agents of Rhode Island. “It’s a tough economy and people only have so many discretionary dollars.”
William Austin, consultant with Austin & Stanovich Risk Managers in Providence, which advises companies on disaster preparedness, said in 2010 it was largely residents and small businesses that could least afford insurance who were hit the hardest by the flooding.
“I think two years ago many of the businesses along the river knew there was a possibility of a flood and had some sort of coverage,” Austin said. “Where we saw a lot of distress was residential and smaller mom-and-pops where they expected the government would bail them out.”
When the flood waters did come, homeowners could seek direct assistance while the best businesses could hope for was low-interest loans to help them rebuild.
To reduce the number of properties in continual risk of flood damage, FEMA has introduced new rules that will cut off future assistance to homeowners who take federal help to rebuild in flood-prone areas and then don’t by insurance.
Flood victims who received government help were automatically placed in a group policy set to expire after three years. At that point property owners will need to take out their own policies to stay eligible for future disaster relief. Austin said he advises clients to think about what could “possibly” happen instead of what will “probably” happen to avoid being blindsided by a natural disaster.
“Can something happen? If the answer is yes, do something,” Austin said. “Either put your house on stilts or get an insurance policy.”
Video-system integrator Shanix Technology, Inc. is one of the companies that has done something to protect against future floods, after its Cranston headquarters was swamped in 2010.
Shanix did not have flood insurance before the flood, which caused an estimated $1.4 million in damage.
Shanix has completely renovated its building. Owner Kekin Shah said he has taken out a flood-insurance policy that covers the first $500,000 in damage, plus supplemental coverage to protect against a similar disaster.
“We had to make sacrifices along the way and watch every penny, but now we would be covered for a similar incident,” Shah said.
Decisions about which properties fall within official flood plains fall to FEMA’s floodplain map makers.
But despite their scale and devastating effect on the area, the 2010 floods are not yet reflected in the current flood-zone maps and won’t be until 2015, according to FEMA spokesman Dennis W. Pinkham.
At the R.I. Emergency Management Agency, Floodplain Coordinator Michelle Burnett said when the new maps do come out – after years of complex and painstaking modeling – the size of official flood zones in some of the neighborhoods hit in 2010 could expand significantly.
Right now, approximately 14 percent of Rhode Island’s 1,100 square miles are classified as flood-prone.
Burnett worries that residents already consider the floods of two years ago an aberration that can never happen to them again.
“I think we are a little more prepared, but I am concerned with the perception that this is a 500-year event that’s behind us,” Burnett said. “We often become complacent about these things.” •

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