The Federal Emergency Management Agency (FEMA) is working on a plan to update and extend the National Flood Insurance Program (NFIP), which Congress may or may not go along with as it considers new flood insurance policy. The proposal could affect the way NFIP calculates the rates for homeowners, possibly lowering costs for a few people but raising the expense significantly for many – notably individuals in flood areas or facing other risk factors.
FEMA flood insurance policies could upend premiums
As opposed to levy premiums in accordance with the dollar amount of insurance a homeowner wants, NFIP might operate similar to property insurance, weighing a roster of risk variables and personalizing premiums.
Currently, flood insurance costs are typically dependant upon the amount of coverage a homeowner wants together with the risk of flood faced – largely if the home is inside or outside a FEMA-designated flood zone.
Florida – home to about 35% of all NFIP policies – could see a significant impact from proposed changes if they become official, though plan details haven’t been announced, and it’s unclear how any specific homeowner could possibly be affected. However, the chances are homeowners in flood zones would see a rise in their flood insurance costs.
When asked by Bloomberg to comment on proposed changes, FEMA offered a statement by David Maurstad, deputy associate administrator for insurance and mitigation. He said the new system “will help customers better understand their flood risk and provide them with more accurate rates based on their unique risk.” According to the theory, homeowners who understand their flood risk will be more willing to buy coverage.
Bloomberg says FEMA’s document provides an example of two homes in a 100-year flood plain. One may sit close to the edge and be threatened by only one type of flood event. FEMA says this home might see its costs drop by 57%. A second home in the middle of a flood plain facing multiple types of flood threats, though, could see its flood insurance costs even more than double.
However, a FEMA spokesperson also said that some of the information provided to Bloomberg no longer is accurate – but didn’t say which parts.
FEMA calls its new flood-pricing proposal Risk Rating 2.0 and says it’s being released at a time when climate change is influencing the national program, which is already in deep debt.
Congress is simultaneously working on its own flood insurance update, and committees meeting this week will talk about it. It’s unclear just how much FEMA’s plan could influence Congressional actions. However, FEMA says it has the authority to update NFIP on its own regardless of whether Congress isn’t going to pass a in depth plan.
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