Risk Rating 2.0 - Equity In Action - Understanding The Changes to Flood Insurance
FEMA is updating the National Flood Insurance Program's (NFIP) system for rating flooding risk. The new system is called Risk Rating 2.0. "The methodology leverages industry best practices and cutting-edge technology to enable FEMA to deliver rates that are actuarily sound, equitable, easier to understand and better reflect a property’s flood risk."
Since the 1970s, rates have largely been based on a property’s elevation within a zone on a Flood Insurance Rate Map (FIRM).
One unintended consequence of this system has been that lower value homes have been subsidizing higher value homes. Many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should.
FEMA's new methodology more equitably distributes premiums across all policyholders based on the value of their home and the unique flood risk of their property.
Property specific details include a building’s unique elevation, distance to a water source, flood frequency, and the cost to rebuild. The cost to rebuild is key to an equitable distribution of premiums across all policyholders because it is based on the value of their home and the unique flood risk of their property.
PHASED IMPLEMENTATION
Phase I: New policies beginning Oct. 1, 2021 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums.
Phase II: All remaining policies renewing on or after April 1, 2022 will be subject to the new rating methodology.
COMPARISON
NATIONAL IMPACT
Nationally, 23% of policyholders are projected to see an $86 per month immediate decrease, and most of the rest will pay about the same or a bit more.
LOCAL IMPACT
Pinellas County is surrounded by water, which means that there are more properties with a risk of flooding. Still, 15% of policyholders are projected to see an immediate rate decrease, and 70% of policyholders will pay about the same or a bit more.
National Flood Insurance Program policyholders should contact their insurance company or insurance agent to learn more about what Risk Rating 2.0 - Equity in Action means to them.
