PIA strongly supports the Flood Insurance Pricing Transparency Act, a bill introduced this week by Sens. Bill Cassidy (R-LA) and Kirsten Gillibrand (D-NY).
FEMA recently updated the risk rating methodology it uses to price flood insurance premiums for policies issued by the National Flood Insurance Program (NFIP). The new methodology, known as Risk Rating (RR) 2.0, assigns premium rates to properties using substantially more granular data than the legacy system, which will be fully phased out by April 1. As a result of this overhaul, RR 2.0 generates rates that are more closely aligned with each individual property’s actual level of flood risk.
As Risk Rating 2.0 has been implemented, it has become clear that independent insurance agents need more information about how the new methodology uses its rating factors to calculate NFIP premiums, especially when mitigation credits are at issue. Agents, recognizing this as another situation in which their needs and those of consumers are aligned, have appealed to FEMA for transparency on these issues. Policyholders deserve to understand how their data is being used to calculate premiums, whether mitigation efforts could change those premiums, and how existing mitigation efforts are accounted for in the new system.
PIA is also pleased that the legislation would require FEMA to create a tool that could be used to estimate the cost of an NFIP policy for new construction without compromising proprietary information. Such a tool would not allow unlicensed members of the public to produce quotes, but it would help agents for policyholders to see for themselves how their rates will change. A tool like this would enhance public understanding of Risk Rating 2.0, help agents explain pricing changes to their clients, and help FEMA begin to address our transparency concerns.
Last week, PIA of Louisiana members met with members of their congressional delegation as part of PIA’s 2022 year-round series of Advocacy Days. During their meetings, they expressed their continued frustration with the rollout of RR2.0, highlighted the lack of transparency associated with the new rating methodology, and explained how the rating engine’s opacity affects their clients.
We appreciate Sens. Cassidy and Gillibrand’s introduction of this important bill. PIA looks forward to continuing to work with the Senators and their colleagues to begin to constructively address agents’ serious transparency concerns.