By Nathalie Voit
Flood insurance rates are going up. Starting Oct. 1, coastal communities around the country will face updated flood insurance prices that take into account what FEMA officials say are the “real” costs of subsidizing some waterfront properties.
The new pricing methodology, known as Risk Rating 2.0, will price policyholders based on their unique risks. The new policy will also consider the size of a property, meaning large oceanside homes are especially likely to see big jumps in their rates.
Until now, FEMA has appraised flood insurance rates based on whether homeowners fell inside a 100-year flood plain, the area expected to flood during a 100-year storm. The latter methodology, critics say, understated a property’s true risk of flooding, which is significantly greater due to climate change. The older system also ignored important flood risk variables like heavy rainfall, coastal erosion, or a property’s distance to a water source.
The result has been a one-size-fits-all policy that benefits wealthy coastal residents at the expense of typically poorer or low-income people inland, the New York Times noted.
“With a rapidly escalating threat of natural disasters, Risk Rating 2.0 is a much needed and timely change,” said Laura Lightbody of Pew Charitable Trusts. Higher insurance prices, she said, were “a reflection of our new, wet reality.”
But others aren’t as enthusiastic. Some communities around the country, particularly in coastal regions like Florida, will see a significant rise in costs. For the majority of the 3.4 million single-family homes insured by the federal flood program, rates will increase no greater than $120 in the first year, according to data released by the agency. Some additional 627,000 homes will see their rates fall. But others may see their costs skyrocket. Over 230,000 households will face increases up to $240 in the first year; an additional 74,000 households will see prices rise by as much as $360. For about 25,000 single-family homes, further costs could reach as high as $1,200, the New York Times reported.
Those increases may not even cover the true amount homeowners will have to pay over the long run. Information released by FEMA only disclosed price changes for the first year, meaning it could take upwards of 20 years for some residents to be charged their full estimates under the new system.
The lack of transparency over the new rates has prompted some people to call out the agency for being “misleading.”
“I want to talk about five to 10 years from now because most people take a 30-year mortgage,” said Jack Holehouse, a flood insurance advocate for St. Petersburg.
The updated flood appraisal program has also evoked concern from lawmakers in Congress. They were so opposed to the changes that they signed a letter two weeks ago to House Speaker Nancy Pelosi (D-CA) urging her to delay implementation of “Risk Rating 2.0” until a more “robust methodology that includes a lower premium cap” for policyholders is adopted.
“The additional burden of up to double-digit rate hikes by FEMA for our constituents, especially those in low- and moderate-income communities, is too much for them to bear,” read the letter.
Still, others are hopeful the new pricing system will alert homeowners to the increased risks of climate change.
“We cannot hide the truth of this increasing risk,” said Roy Wright, the former chief executive of the National Flood Insurance Program, the primary underwriter of flood insurance managed by FEMA. “We shouldn’t hide it. Tell people the truth.”