Hurricane Ida recently soaked the Tristat area. According to CNN, NYC and many local cities were never designed to withstand such floods – and it turned out. In addition to the massive property damage, at least 46 people died in the region.
Floods are a major threat, and recent studies have shown that the flood maps that have been used for decades are very outdated. As a result, many property owners may not be aware of their actual risk, and insurance prices may not accurately reflect risk levels. The good news is that this is changing. New flood maps provide a more accurate assessment of the risks, and changes to the flood insurance program will affect how prices are calculated.
The Urgent Need for New Flood Maps
In early 2020, Scientific American reported that at least two separate reports had found that FEMA flood maps were missing: a report by the Association of State Floodplain Managers criticized the maps for covering less than half of the country's waterways and coastline, and a report from the R Street Institute found that the maps were very outdated.
At the same time, climate change may increase flood risk in many areas . According to the First Street Foundation, when adjusting for climate change, nearly 4.3 million homes have a significant flood risk, but the flood risk is often underestimated.
Consensus was clear. New Maps Needed
The First Street Foundation created new property-level maps and publicly available flood risk maps. Using the Flood Factor, you can enter any address in the country and get a risk assessment that includes the flood factor risk score and the probability of flooding within 30 years, as well as some other useful information to help users understand the flood risk.  FEMA has also updated its flood maps. According to GovTech, these updates took effect on August 24, 2021, and the changes may affect premiums as well as which homeowners need coverage.
Flood Insurance Misconceptions
Marketwatch recently reported that 53% of homeowners mistakenly believe flood damage is covered these standard insurances, when in fact only 10% of the flood risk is insured by the National Flood Insurance Program.
Updating insurance prices
FEMA updates the risk classification methodology of its national flood insurance program. . The new price model is called Risk Rating 2.0.
Since the 1970s, prices have been based on mostly static measurements that largely focus on the height of a property. The new model contains many more flood variables to create more accurate prices. The model also includes conversion costs to make the premiums fairer – according to the old model, owners of lower-valued homes can end up paying more than their justified share.
The new risk model will be rolled out in two phases:
- ] From and from 1 October 2021, new insurers will use the new risk model, and policyholders entitled to renewal may be able to use the new model to reduce their premiums.
- From 1 April 2022, all insurers will use the new classification model
We have already seen rising prices and other insurance difficulties in disaster-prone areas. As climate change increases the risk of severe weather-related events, insurance costs are likely to continue to rise.
This is something that homebuyers and their advisers should carefully consider. In addition to using resources such as the Flood Factor to assess risks, homeowners may also want to invest in climate-safe upgrades. Although these investments will add immediate costs, they may result in lower insurance premiums and reduced long-term risks.
The personal insurance team at BNC Insurance is here to help. Contact us for more information .