Frequent visitors to the blog will remember our numerous posts covering the forthcoming changes to the way flood insurance rates are calculated for policies issued through the National Flood Insurance Program (NFIP). PIA strongly supports Risk Rating 2.0 (RR 2.0) because it will help the NFIP move more quickly to the use of actuarially sound rates commensurate with the level of flood risk posed to individual properties.
The rating engine driving the new RR 2.0 pricing methodology was scheduled to come online for quoting and policy issuance for Phase I policies (defined here) this past Monday, August 16. NFIP carriers, known as Write-Your-Owns (WYOs), and their agents expected to gain access to the system beginning on Monday, but many flood agents were frustrated and surprised to find they had no more access to the rating engine on Monday than they’d had before. This development, which we’ll return to in a moment, illustrated a lack of transparency that has plagued the RR 2.0 implementation process. We have been disappointed throughout the rollout by the lack of agent-specific information and education coming from the Federal Insurance and Mitigation Administration (FIMA), which oversees the NFIP. FIMA’s agent-specific training sessions, for example, have not provided the depth or breadth of information we had hoped for.
As they always are, independent agents will be the “face” of these rate changes to policyholders, and the information FIMA provides to agents should reflect their essential role. To that end, today we sent a letter to David Maurstad, the Deputy Associate Administrator of FIMA, expressing our concerns about FIMA’s haphazard dissemination of information about RR 2.0 to agents and policyholders thus far and suggesting topics and formats for FIMA to deploy to better meet the needs of agents and policyholders going forward.
Getting back to the rating engine issue, in response to our inquiries on Monday, FIMA assured us that the rating engine was live and was permitting quoting and policy issuance for new policies (with effective dates of Oct. 1, 2021 or later). That said, we have heard that the vendors servicing most WYOs (at least 36 of the 55, by our count) have not turned on the rating engine yet. Anecdotally, we have heard vendors are delaying use of the new rating engine because it lacks some of the functionality it will ultimately have. (For example, the rating engine will eventually be able to process renewals and cancellations, but it may not be capable of doing so yet.)
WYOs have begun training agents on the new systems, so agents who sell NFIP flood insurance policies should contact their WYOs about agent training, if they have not already done so. Based on the information we gathered this week, we expect most agents to have access to the rating engine by Sept. 1, which is also the expected publication date of final versions of the Industry Transition Memo and Flood Insurance Manual, drafts of which are available here.
PIA is continuing to work with FIMA to improve the rollout of Risk Rating 2.0 for the benefit of our members and the consumers they serve. We will continue to keep you updated as the RR 2.0 rollout continues.