What To Know And Share About The New NFIP Rating 2.0

UPDATE: FEMA has delayed its revamping of the flood risk rating structure until October 2021.

David Maurstad, chief executive of the NFIP, announced a new rating structure called Risk Rating 2.0 is being developed, which will be a “game-changing initiative for the NFIP.”

Revising the NFIP rating structure is what everyone has been asking FEMA to do for years; that is, to simplify and be transparent. It is also good to remember that increases to NFIP premium rates are subject to existing maximums set with the flood reform laws.

The new Rating 2.0 will help agents sell more policies, will be:

  • Good for insureds to understand their risk and protect their most valuable asset
  • Good for taxpayers by reducing the dependency on grants and loans
  • Good for the NFIP increase the number of policies in the program

Why is the rating system being overhauled?

“The intent of 2.0 is risk transparency and ease of rating,” Patty Templeton-Jones, President of Wright Flood explained. “This will help people in all areas to better identify their risk. It will also make rating much easier.”

When will rates actually be changing?

FEMA has delayed its revamping of the flood risk rating structure until October 2021.Under the new postponement, the revamped rating system will go into effect in October of 2021 for all policy types. Further rating specifics are, as of yet, unknown and still subject to change leading up to that point.

What will change?

“No longer will an A zone in a coastal state be the same as an A zone in say, Montana. Nor will an X zone near a body of water be the same as an X zone more inland,” Patty explained.

Generally the plan is to incorporate new flood risk factors into the rating structure in addition to flood zones such as:

  • Types of flood risk such as heavy rain, river overflow and/or coastal surge
  • Distance to the coast or water source
  • Cost to rebuild the structure

Will flood insurance premiums change?

It will have an effect on rates, per David Maurstad: “Yes, some people’s rates will increase, other people’s rates will decrease. We don’t know what that looks like at this time.” But remember there are legislative caps on rate increases.

Will flood zone maps still be used in rating?

  • Yes, use of flood zone maps will continue.
  • Community rating system will also continue; providing discounts on flood insurance policies based on the community’s flood mitigation efforts.

“The intention is to close the insurance gap,” stated Maurstad. More insured survivors increases the resilience of the community and our country.

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