FEMA is set to begin a new rate system for charging on flood insurance. The new rate system is supposed to Friday. But on Tuesday, four U.S. senators of states along the Gulf Coast filed to get a year’s delay. The senators include John Cornyn (R) of Texas.
The new system is called “Risk Rate 2.0” and FEMA, in a news release, describes it as “more equitable and risk informed rate.”
Insurance agent Heather Montagne of Orange said flood insurance has a 30-day waiting period before going into effect and that it was incorrect that someone could buy a new policy on September 30 to get an older price before the change in risk ratings. Also, an insurance agent cannot change a renewal date.
Under Risk Rate 2.0 people across the country may have cuts in their rates, however coastal residences and those along waterways are likely to have increases. Nearly 80 percent of current policyholders will likely have increases when the rate system is implemented, according to Senator Marco Rubio (R-Florida) in a news release. Rubio is one of the senators fighting the new system.
FEMA said the new pricing will reflect a property’s full risk rate.
The new rate system is separate from the new flood maps set to go into effect for Orange County in December.
FEMA has set a way for the new ratings to be applied in phases. Existing policy holders who have a decrease in costs will be able to take advantage immediately of the cuts on October 1.
In April, all remaining policies will be written under the new pricing plan at the time of renewal.
FEMA reports most rate increases are capped at 18 percent each year.
The proposed bill by the senators, if approved, will push back the entire implementation for a year.
The federal government created the National Flood Insurance Program in 1968 when private insurance companies stopped underwriting policies to pay for flood damage.
The Federal Flood Insurance Program was self-sustaining for more than 40 years with payments for policies covering the payments for damages. However, after Hurricanes Katrina and Rita in 2005, the flood insurance system began losing money. The increase in national disasters from hurricanes and river floods since then has made the deficit grow larger each year.
FEMA has been trying to raise rates to get the flood insurance program to pay for itself again, however people who live in flood-prone areas including the coast have protested high increases.
Written by Margaret Toal