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Federal Flood Rates Rising Despite 2.0 Delay

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NCOIL private model flood law progressing

Recent news that FEMA is delaying its new Risk Rating 2.0 structure in the National Flood Insurance Program (NFIP) for another year won’t impact planned double-digit premium increases beginning in April 2020.  Meanwhile, progress is being made to produce a private flood insurance model act that states can adopt to encourage private market alternatives to the NFIP.

Congress – which is on its 13th consecutive short-term extension of NFIP reauthorization – and the NFIP leadership have butted heads for months on whether NFIP had the regulatory authority to move ahead on its own with more realistic, actuarially-based rates under the 2.0 program.   The NFIP is $20.5 billion in debt as a result of recent, more severe disasters and the fact its rates subsidize coastal residents’ true risk – including Floridians – who as a whole represent 34% of the NFIP’s 5.1 million policies.

Recent pressure by Congress and the upcoming election year, pushed FEMA to announce it will delay the new rates under Risk Rating 2.0 until October 2021 instead of October 2020.

“Some additional time is required to conduct a comprehensive analysis of the proposed rating structure so as to protect policyholders and minimize any unintentional negative effects of the transition,” according to a FEMA news release.  “Additionally, this extension allows for all National Flood Insurance Program (NFIP) policies – including, single-family homes, multi-unit and commercial properties – to change over to the new rating system at one time instead of a phased approach, as originally proposed.”

Even so, some NFIP rates will be going up in 2020.  A recent FEMA bulletin notes that “nearly 80% of policyholders already pay a full-risk rate.”  For the remaining 20%, FEMA says that beginning April 1, renewal premiums will increase an average of 11.3%.  That doesn’t include the 2015 HFIAA Surcharge or the Federal Policy Fee.  On top of that, the Severe Repetitive Loss Premium is rising 10% for those properties of the same name that keep flooding and being repaired or rebuilt over and over again.  (They’ve also revised the NFIP Flood Insurance Manual.)

Lisa Miller presents before the NCOIL Special Committee on Natural Disaster Recovery, July 11, 2019

A Realtor colleague attending a recent conference featuring NFIP Chief Executive David Maurstad reports she’s cautiously optimistic that rates for Pinellas County (St. Pete) properties will see lower costs based on what conferees were told and the new LIDAR maps showing many areas’ base elevation level improving.

On the private flood insurance scene, we are getting ready for next month’s National Council of Insurance Legislators (NCOIL) meeting.  A compromise draft of the Private Flood Insurance Model Act will get its first reading.  The hang-up has been over the role insurance agents should play in educating policyholders on pricing of NFIP and private policies.  We’ve been pushing for an active role, given the large number of Americans who don’t know they live in flood hazard areas, let alone still don’t understand that homeowners insurance doesn’t cover flooding!  The draft language requires “producers” notify applicants that flood polices – public and private – exist.  We applaud NCOIL for this compromise bill!

Read the rest of the LMA Newsletter of 11-18-19 

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Tags: FEMA, Flood Insurance Rates, Model Private Flood Insurance Law, National Flood Insurance Program, Private flood insurance, Risk Rating 2.0

“Just wanted to say that I thoroughly love your newsletter. It’s is always informative and insightful to the ins and outs of our industry.  You are an inspiration and an important asset in the insurance world.  Keep up the great work!” 

Cynthia Scott, President
University Insurance Group
Davie, FL

“Lisa this is another great newsletter, and we appreciate the time and energy you put into these informative updates – you are on top of these topics!”

Mike Graham, CEO
Smart Vent Products, Floodproofing.com, & Risk Reduction Plus
Juno Beach, FL

“I have followed your weekly newsletter and podcasts and now have a full appreciation for what you bring to this industry.  You are an inspiring force, plain and simple.  I wanted you to know that you make a difference.  Thank you for all you do!”

Jeffrey Karam, CPCU
Bradenton, FL

“Just a quick note to let you know how much I have appreciated your newsletter over the years and the assistance they offer for those in the field of claims. We depend on the information more than you will ever know!”

Laurie Rasberry, Chief Claims Officer
Acorn Claims
Prosper, Texas

“Thank you Lisa for staying on top of, as well as advocating, for Florida residents and legislative reform. Your newsletters are very informative and enjoy reading the points of view.”  

Shawna Miller, Sr. Claims Quality Assurance & Compliance Manager
Florida Peninsula Insurance Company
Jacksonville, FL

“Your newsletter is fabulous!  I greatly appreciate the topics you expose, so that insurance professionals like myself can keep up with the latest events that affect the public we serve and ourselves.”

Cynthia Hoehn, Independent Property & Casualty Personal Lines insurance agent
Clermont, FL

“Great article on Risk Rating 2.0!”

Austin Perez, Senior Policy Representative for Federal Housing, Valuation, Insurance and Commercial Issues
National Association of Realtors
Washington, D.C.

“Another great Newsletter on Florida industry this week.  Your service and advocacy in Florida is very important to keeping me updated and apprised of the Florida insurance laws, trends and overall environment.  Something similar is very much needed in Louisiana, too.”

Jennifer Tedesco, Esq., Claims Director
Pharos Claims Services
Orlando, FL

“Lisa Miller is a true champion for the insurance industry, with her regular updates! We appreciate all you do and keeping us up to date on priority issues!”

Gillian Lloyd, Account Executive
Zywave
Milwaukee, WI

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