FEMA’s New Flood Insurance System Means Higher Local Premiums
Effective October 1, the National Flood Insurance Program (NFIP) implemented a new scoring system called Risk Rating 2.0 to determine how much policyholders should pay in premiums. And while the Federal Emergency Management Agency (FEMA) hails the new pricing system as being fairer to policyholders, some local experts are sounding the alarm bells about premium increases here.
Of the 140,000 NFIP policyholders across the state of North Carolina, FEMA estimates that 25.5% will see a decrease in their monthly premiums, 65.6% are expected to see a monthly increase of $ 10 or less, 6.1 % an increase between $ 10 and $ 20 and 2.8% could support an increase of $ 20 or more. FEMA does not break down these statewide projections to the regional or county level.
But given the flooding and weather risks, Outer Banks owners are considering higher premiums, the question being by how much.
“I think we’re going to see increases here,” said Willo Kelly, chief executive of the Outer Banks Association of Realtors, who says he has heard anecdotal evidence from local insurance agents before.
For local homeowners who are getting new policies after the new rating system launched on October 1, Kelly said, “We’re hearing right now [insurance] agents that some did not see this coming. Regarding the impact on the subscription of new policies effective after October 1, they note a sharp increase in what would have been the amount of the premium before October 1. “
But she added: “We are not going to feel the full effects of this until April 2022, when the 2.0 risk rating is applied to [policy] renewals.
For those April renewals, Kelly said policyholders could see annual increases of up to 18% per annum if they have a primary resident policy and a 25% increase for secondary owners up to. what they hit what FEMA says is your “actuarial” risk range.
According to FEMA, when calculating premiums, rather than relying solely on the flood zone a property is in, the new rating system uses a new technology model to determine an individual property’s unique flood risk. . Calculations include variables such as frequency and types of flooding, as well as the distance between a property and a water source and property characteristics, such as elevation and cost of reconstruction.
Kelly pointed out that with the recent update and certification of Dare County flood maps last year – maps that have been widely criticized by local authorities – 75 percent of Dare County properties have removed entirely from a flood area or moved from a higher risk area. to a low risk area in the special flood risk area. This means that they either benefited from preferred risk policies – which offered a flat rate – or they were moved to a lower risk area and saw their premium drop.
That will change now, she said, with the bonuses being based on the value of the structure and distance to a body of water as well as other characteristics of the property.
“We are still set up with a system which, as they anticipate more policyholders inland, place the burden of repairing this program and paying the debt that is in this program on the coastal policyholders. current and future. ” Kelly noted.
For her part, Dare County Planning Director Donna Creef told The Voice she was skeptical of the new scoring system.
“There is no doubt that it makes sense to be property specific,” she said. “But this is a radical change.”
After noting that the information officers must enter into the system to assess structures is based on the same computer models FEMA used for the more recent flood maps, Creef said, “I’m skeptical because it is the same agency that gave us these flood maps that we have for the county, which are quite flawed.