Floods can strike anyone.
“All 50 states have experienced significant flooding,” said Ileana Ledet, senior vice president of Policy at Greater New Orleans Inc.
Recent changes by the Federal Emergency Management Agency, (FEMA), to flood insurance premiums were made for the first-time in many decades.
“The old model was sort of a 1986 Pontiac. It wasn’t wrong, it could get you from point A to point B, but it was a rather blunt instrument,” said Roy Wright, CEO of the Insurance Institute for Business and Home Safety. .
The new program’s name is Risk Rating 2.0. Wright was the former chief executive officer of FEMA’s National Flood Insurance Program. He said that the agency uses more science and better technology in order to recalculate flood risk for everyone.
He said, “You must pay a rate that’s fair and specific to your area and the house you live in.”
The new program will impact everyone differently depending on whether they are a new customer or an existing one.
“From October 2021, all of these changes will impact new customers,” he said. “As of April 2022, when they renew, existing customers will experience these changes brought about by Risk Rating 2.0.”
“This is a long time coming, and it is certainly not without controversy,” said Jeff Schlegelmilch, director of the National Center for Disaster Preparedness at Columbia University.
“This is kind of a first step to make the National Flood Insurance Program more solvent, but it’s just a small piece of a much bigger consideration of where we build, how we build, and what the true cost of building in vulnerable areas is. Shlegelmilch added. “These disasters are happening with increasing frequency and intensity. The costs of these disasters continue to rise.”
The exact impact of these rate changes depends on where you are located. Wright indicated that one in four families will have their rates cut and that most will stay the same. However, others will need to pay more.
“There is a group of 10 to 12 percent for whom they are currently paying less than they should, and they will see their rates go up several steps in the coming years,” he said.
These rates may not be changed all at once.
Wright stated that they won’t experience an increase of more 18% each year.
However, for some homeowners this new ration system can cause a lot of confusion.