Friday morning, a packed room of REALTORS® heard from David Maurstad, the Deputy Associate Administrator for Insurance and Mitigation at FEMA, about the future of the National Flood Insurance Program.
Maurstad spent most of his time outlining changes in how FEMA evaluates and rates the risk of properties, which then dictates the premium of a flood insurance policy. The current risk rating system has not changed since the 1970s.
Risk Rating 1.0, as Maurstad described it, looks at only a few factors to determine the risk (and ultimately the premium) for an individual property: the rate map zone, base flood elevation, foundation type, and structural elevation.
Given how much more data we have available today, and our ability to process and make predictions, it is clearly time for a better rating system. The new system being developed takes into account geographic and structural variables to determine both the likelihood a property could experience a flood and the amount of damage it is likely to sustain.
The intent is that the new rating system will not only be more accurate, but easier for both insurance agents and policy holders to understand. If people better understand why the rate is what it is, the hope is that they will make better decisions when it comes to purchasing flood insurance.
The original plan was to roll out the new rating system for residential policies next year and commercial /multi-family properties in 2021, but FEMA has recently decided to delay the residential rollout to be able to launch all the new systems at the same time.