Flood Insurance Risk Rating 2.0Posted: October 21, 2021
- FEMA is replacing an inaccurate rating system that has not been updated in half a century and is not sustainable for homeowners or taxpayers as it’s based on 50-year-old technologies and only two pieces of information about a property—in this case, flood zone and base elevation certificate. If FEMA did not make these changes, NFIP rates would continue to climb 18% to 25% per year until reaching the current top rate of $63,000 for a $250,000 home.
- Risk Rating 2.0 will reduce the top rate in the program from $63,000 to $12,000 per year. One million homeowners will see a significant rate decrease while the majority of other homeowners will pay a slight increase. Each home will be priced individually using modern industry technologies, a dozen flood risk variables, and property-specific characteristics including elevation, distance to water, and cost to rebuild. Low-value properties will no longer subsidize high-value properties, and elevation certificates are not required for an accurate rating.
- Because each property is now rated individually, only a licensed insurance agent will be able to tell your client whether their rate is going up or down under the new system.
What Isn’t Changing Under Risk Rating 2.0
- Risk Rating 2.0 applies only to risk-based NFIP rates and will not affect flood mapping or insurance requirements, which will continue to be enforced by Congress, local communities and lenders.
- Grandfathered rates, including for newly mapped or pre-Flood Insurance Rate Map (FIRM) subsidized properties, will continue. By law, increases will not be more than 18% per year.
- Policyholders will still be able to transfer their grandfathered rates and other discounts to a buyer/new owner by assigning their flood insurance policy at the time of the sale of the property.