FEMA Launches New Flood Risk Rating System
The Federal Emergency Management Agency (FEMA) has announced a new risk rating system, called Risk Rating 2.0, for the National Flood Insurance Program (NFIP). The goal of the new effort is to help consumers better understand their flood risk and the actions they can take to reduce it.
Under Risk Rating 2.0, risk will be determined based on data points rather than whether a policyholder is located in a flood zone. This includes variables such as different types of floods, the distance a building is from the coast or other water source, or the cost to rebuild a home. The new system will also no longer impose dramatic rate increases for policyholders during map changes or for those who live at the edge of a flood zone.
According to a statement by FEMA, the organization will reduce the complexity of buying flood insurance by leveraging industry best practices and technology, so that it is as straightforward as homeowner’s and auto insurance for agents and consumers.
New rates for single-family homes will take effect on October 1, 2020. FEMA will release more information in the coming months as it becomes available.