The National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA), is the primary source for flood insurance in the United States. Over the past few years, FEMA has been updating the NFIP’s risk rating process using a new methodology known as Risk Rating 2.0 (RR 2.0). It is scheduled to be implemented later this year, and it will assign a level of risk to each individual property in the program, providing more specific and accurate information about an NFIP property’s flood risk than the legacy rating methodology provided.
Since April 1, FEMA has been unveiling the details of RR 2.0 in piecemeal fashion about once or twice a month. Materials released by FEMA show that RR 2.0 will provide about 23 percent of current NFIP policyholders with an average decrease in premium of $86 per month. At the other end of the spectrum, the four percent of current policyholders facing the highest premium increases will receive a premium increase of, on average, more than $20 per month. FEMA has said that the policyholders who will be subject to precipitous premium increases are largely owners of high-value homes in high-risk areas.
The changes will go into effect for new policies on October 1, 2021, and for renewals on April 1, 2022. However, NFIP policyholders whose premiums will decrease under RR 2.0, and whose policies have renewal dates between October 1 and April 1, will be permitted to opt into RR 2.0 beginning with their next renewal, even if that renewal comes before April 1, 2022. Offering RR 2.0 to some existing policyholders before it is made available to all existing policyholders poses substantial potential for consumer confusion and frustration as Write-Your-Own (WYO) carriers and agents try, with little guidance from FEMA, to identify properties eligible for early transition to RR 2.0. PIA is working with agents, carriers, other trade groups, and FEMA to help independent agents successfully navigate this complicated transition process.
To that end, FEMA has scheduled several Risk Rating 2.0 agent-specific training sessions for July and August. If you have not already received information about how to register for the training sessions, please contact Lauren Pachman at Lpachman@pianational.org for details.
PIA is in ongoing communication with FEMA regarding the rollout of RR 2.0 and encouraging FEMA to better support its agent salesforce during this transition.