Rollout of FEMA’s Risk Rating 2.0 began in October, and homeowners across the country are beginning to feel its effects. States like Louisiana are particularly impacted as FEMA’s National Flood Insurance Program (NFIP) has struggled to balance affordability and actuarial soundness. The end result is that homeowners in particularly risky areas could see 500 to 700% rate increases over the coming years.
Historically, FEMA based insurance rates on flood zones called Special Flood Hazard Areas (SFHAs). These SFHAs are oftentimes decades old, failing to account for advances in mapping technology that enable risk assessment down to the square foot. They also don’t incorporate how the home is built or how much it will cost to rebuild in the event of a flood. By bringing new data into the fold, Risk Rating 2.0 attempts to put FEMA onto firmer footing. In a period of rising inflation, these costs are particularly unwelcome in the most impacted coastal areas.
While these rate increases will happen slowly--no more than 18% per year--homeowners in areas like Louisiana are in for substantial cost increases over time. Market disruption is never fun, but a robust set of private market flood insurance providers are already beginning to fill the gap. Not only do private providers offer more coverage options, but often at much lower rates than Risk Rating 2.0.
With prices shifting rapidly, rate comparison has never been more important. Annex brings the best private market providers and the NFIP together into one simple interface, making it easy for insurance agents to offer the lowest price to their customers.