NEW ORLEANS (WGNO) – Louisiana homeowners who have flood insurance will soon see a change in their rate.
During the Hurricane 2022 Virtual Summit on Wednesday, FEMA spokesman Gilbert Giron said FEMA has paid $1.2 billion per year in claims for the past six years, which has left the agency $20.5 billion in debt. As a result, FEMA is updating their National Flood Insurance Program (NFIP) with what they’re calling Risk Rating 2.0.
Currently, FEMA’s Risk Rating 2.0 is in Phase II, which means all policies that are up for renewal are subject to the new rating methodology.
“The objective around Risk Rating 2.0 is to bring everyone to their full risk rate in a way that will help the National Flood Insurance Program remain a solvent program, [and] at the same time, have less of an impact over the long term for our insured,” explained Giron.
About two-thirds of policy holders nationwide with older pre-FIRM (flood insurance rate map) homes will see a premium decrease.
According to Giron, in the past, lower-value homes were subsidizing higher-value homes when they looked similar.
“It is something that we can anticipate with the lower-value homes, is that they will have a lower flood insurance premium compared to those who have a higher-value home, [who] can anticipate a higher flood insurance premium,” said Giron.
With Risk Rating 2.0, 70% of the 495,900 NFIP policy holders in Louisiana will see increases of up to $10 per month. Twenty percent of policy holders will see immediate decreases whereas ten percent will see increases of ten dollars or more per month once they reach their full-risk premium.
“Once policy holders hit that full-risk premium, unless there’s a significant change to the rating variables, then there will no longer be any increases to that premium, said Giron .”
Risk Rating 2.0 eliminates grandfathering because of the program’s new pricing methodology, but existing grandfathered policies will be on a glide path.
“[Grandfathered policies] will still experience their increase at 18%, but their starting point is often going to be much lower than a standard flood insurance policy,” said Giron. “This gives them many years to make informed decisions on how to move forward.”
With less than two months until hurricane season, a spokesman for the Louisiana Department of Insurance is reminding homeowners that policies change annually, and it’s crucial they read those policies.
“The worst time to read your policy is after you had a loss because now, you’re panicking, and there are things you may have missed,” said Ron Henderson, the deputy commissioner for the LDI Office of Consumer Advocacy & Diversity.
For more information on Risk Rating 2.0 , click here.