FEMA is updating the National Flood Insurance Program’s (NFIP) risk rating methodology through the implementation of a new pricing methodology 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.
The Bradenton Herald reports, “More than a million Floridians will see their flood insurance premium rise next year, FEMA said Thursday.
The good news is, most will see increases of less than $120 a year. The bad news is that homeowners will likely see annual rate hikes like that for the foreseeable future.
The new strategy is meant to help pull the program out of its $20 billion debt and encourage people to live in safer, less flood-prone homes.
The new program will stop charging flood insurance premiums based solely on whether a home is within or outside of a flood zone and instead consider a range of factors like distance from the ocean, rainfall flooding and the cost to rebuild a home.
Starting April 2022, this pricing revamp will lead to higher prices for a majority of Florida’s 1.7 million policyholders — the most of any state — as well as a decrease for about 20% of policies, more than 340,000 policyholders.
“It allows us to set accurately sound rates and communicate flood risk better than we ever have before,” David Maurstad, senior executive of FEMA’s National Flood Insurance Program.
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