FEMA Unveils ‘Risk Rating 2.0’

On Monday, FEMA announced changes to the way the NFIP will charge homeowners for flood risks. The change—dubbed “Risk Rating 2.0”—could have a significant impact on flood insurance bills for millions of Americans.

The changes could lead to higher flood insurance rates for some homeowners and lower rates for others. FEMA believes that “Risk Rating 2.0” will enable it to use new data to more accurately price flood risk for NFIP policies. Instead of primarily focusing on whether a property is in a 100-year flood plain, FEMA will now use data based on an individual property’s flood risk and rebuilding cost to price NFIP policies.

As the NFIP moves forward with “Risk Rating 2.0” and rates better reflect the gradation of risk within a flood zone, the Big “I” is hopeful that the result will be more transparent and accurate flood insurance pricing. The Big “I” is also hopeful that “Risk Rating 2.0” will eventually yield better risk communication for consumers, driving an increase in flood insurance take-up rates.

FEMA plans to announce the new flood insurance rates for single-family homes April 1, 2020, and said the rates will take effect Oct. 1, 2020.

The NFIP is currently scheduled to expire on May 31 of this year. “Risk Rating 2.0” could become part of the conversation in efforts to reauthorize the program on a long-term basis.

Wyatt Stewart is Big “I” senior director of federal government affairs.