More than a year after President Obama signed into law the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), FEMA is still working on implementing changes to the NFIP and flood insurance rates across the country.

Ultimately, HFIAA “slows some of the rate increases mandated by Biggert-Waters, offers relief to some policyholders that experienced high rate increases when Biggert-Waters was implemented and adds additional surcharges and fees,” explains Cassie Masone, vice president of flood operations at Selective Insurance Company of America.

As FEMA continues the implementation process, what can independent agents and their clients expect?

Rate increases. FEMA has scheduled a number of changes to occur on April 1 that will impact the overall cost of many flood policies, Masone says. “Specifically, many policies can expect to see increases in the Reserve Fund Assessment and increases in the Federal Policy Fee, as well as overall rate increases that are now being capped on most policies,” she explains.

Secondary homes—those lived in less than 50% of the year—in high-risk areas that were built before the community’s first Flood Insurance Rate Map took effect (also known as pre-FIRM) will receive a 25% annual rate increase, “which means essentially every four years, rates are doubling,” says Bruce Bender, specialist in outreach and risk communication services and a national consultant for FEMA’s FloodSmart marketing campaign and FEMA’s Risk MAP effort.

Pre-FIRM businesses should also receive a 25% increase, Bender says, but first FEMA must find a way to distinguish between businesses and other non-residential buildings, such as churches. “With the help of WYO companies and agents, FEMA will be identifying out of the 5.5 million policies which ones are businesses,” Bender explains. “Until they can, all non-residential buildings are going to see up to an 18% increase annually. Starting probably next year, those pre-FIRM businesses will be on a 25% rate increase.”

Increases for post-FIRM buildings in high-risk areas will continue at the typical rates of 9-12% before the surcharge, Bender adds.

New surcharge. According to Bender, “the big kicker this year is the addition of the surcharge.” During the development of HFIAA, Congress had to balance rate rollbacks and refunds with positive income by adding a surcharge for all flood insurance policyholders, he explains. That means beginning April 1, primary residents will pay an annual surcharge of $25 regardless of flood zone; all other buildings, including secondary homes, businesses, condos and more, will pay an annual surcharge of $250.

And for some policyholders, that could mean serious sticker shock. “If you have a post-FIRM secondary building, you might be paying around $850 today,” Bender says. “On renewal this year, starting April 1, you’ll pay close to $1,200. That’s about a 40% increase.”

Bender’s biggest concern is for policyholders who are not located in high-risk areas and aren’t required to purchase flood insurance, but still opt to purchase a Preferred Risk Policy. For $200,000 in building and $80,000 contents, those insureds would pay a premium of $390 to protect a secondary home, Bender notes.

But “this year, that renews at $630,” Bender says. “That’s a 62% increase. So if the bank’s not requiring you to buy flood insurance, are you going to keep it? This surcharge that allows people to keep their pre-FIRM subsidized rates longer is now causing another subsidy of its own and impacts all policyholders.”

New deductible option. HFIAA also adds a $10,000 deductible option for all residential property owners, including single-family and two-to-four family dwellings, Masone points out. “It is important to note that this new deductible amount applies to both building and contents coverage,” she says.

“That results in a 40% discount,” Bender adds. “If there’s a lender involved, typically the lender will probably have to approve such a high deductible. But you combine that with community rating system discounts, and it could help.”

What are the top 5 flood insurance issues you should watch this year? Keep an eye on IAmagazine.com and upcoming issues of the Markets Pulse e-newsletter to find out.

Jacquelyn Connelly is IA senior editor.