Florida residents have been worried about pending flood-insurance price hikes for quite some time. It’s no secret that the National Flood Insurance Program (NFIP) is dealing with a multibillion-dollar debt. In an effort to keep the program from going under, the federal government is going to be forced to significantly raise rates. Luckily for Floridians, that time may not be coming for a few months yet.
Of course, any changes to the rates that the NFIP offers will have national implications, but no where will those changes be felt more intensely than Florida. That’s because 35% of NFIP policies are written in that state.
The Federal Emergency Management Agency (FEMA) has made it clear that the rates will be going up, but after an outcry from several members of the U.S. Congress about the effects such hikes will have on their constituents, the agency announced that it would enact its new rates in October 2021, instead of 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,” the agency said in a statement. By waiting the NFIP will also be able to change all of the policies in one go, instead of having to do it in stages like they had initially planned.
The NFIP’s flood insurance program is predicated on outdated FEMA modeling. As a result, many members of the program are paying far less than they should, while others are paying far more. Fixing this situation will not only require a complete remodel of policy prices, but also a remodel of how the agency assesses flood risk.
“People for 40 years were led to believe that FEMA flood maps were the gospel on their flood risk,” said Albert Slap, president of Florida-based Coastal Risk Consulting. “People have been wiped out as a result of following FEMA flood maps.”
All of these raises are part of a plan the NFIP has dubbed “Risk Rating 2.0”. The entire program is designed to get the agency back in reasonable financial shape. A lofty goal to be sure. Will it work? Only time will tell, but something has to change for the program to continue and as the last few years have shown us, flood insurance is only going to become more important as time moves on.