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Coming October 1 to a Property Near You: FEMA Implementing NFIP Risk Rating 2.0

April 01 2021

On April 1, FEMA issued a press release announcing that it is updating the National Flood Insurance Program's (NFIP) risk rating methodology through the implementation of a new pricing methodology called Risk Rating 2.0.

cartofront Road May FloodThe new methodology leverages industry best practices and cutting-edge technology to enable FEMA to deliver rates that are actuarially sound, equitable, easier to understand and better reflect a property’s flood risk.

In short, the government is seeking to modernize NFIP to match private flood insurance pricing models so that we have one, consistent manner of pricing flood insurance from coast to coast. We wrote this article comparing NFIP flood insurance compared to the emerging private insurance market.

From the press release, a few key headlines:

  • FEMA is conscious of the far-reaching economic impacts COVID-19 has had on the nation and existing policyholders and is taking a phased approach to rolling out the new rates.

FEMA and NFIP are preparing U.S. homeowners with the reality that flood insurance pricing will be accurate based on intended risk, taking federal subsidy out of pricing over the next several years.

Key dates:

Phase I

New policies beginning Oct. 1 will be subject to the new rating methodology. Also beginning Oct. 1, existing policyholders eligible for renewal will be able to take advantage of immediate decrease in their premiums (to the extent applicable).

Phase II

All remaining policies renewing on or after April 1, 2022, will be subject to the new rating methodology.

Given that this is a federal program, FEMA continues to engage with Congress, its industry partners and state, local, tribal and territorial agencies to ensure clear understanding of these changes.

As written prior, Risk Rating 2.0 is going to cause necessary changes in the pricing of NFIP flood policies, with a recent study of Floridians in flood zones potentially underpaying for flood insurance by as much as 379%. Study: Floridians in Flood Zones Underpaying for Flood Insurance by Average of 379%

And with this important coming change, and potential impact on total cost of home ownership, it is strongly urged that all REALTORS® integrate flood insurance into every client conversation.

Cartofront Book Cover 3D ENIf you are interested in learning more, access our free eBook: Everything You Always Wanted To Know About Flood Insurance* (*But Were Afraid To Ask)

Or,

Join our weekly, free REALTOR® training on Tuesdays at noon EST. Sign Up Here. Note: Tuesday, April 27 Training in Spanish. Sign Up Here (Spanish)

CartoFront is a technology services company that is simplifying flood insurance for REALTORS®, their clients, and insurance agents.