5 Things You Can Tell Your Clients About Risk Rating 2.0: Equity in Action

NFIP is now using an updated, modern pricing methodology to develop premiums that reflect each individual property’s unique flood risk. This methodology, known as Risk Rating 2.0: Equity in Action, will help ensure rates are equitable so your clients won’t pay more or less than they should. Use these talking points to inform conversations with community members and to answer any questions they may have about Risk Rating 2.0: Equity in Action and what it means for their rates: 

1. It’s modern. The previous methodology to determine premiums was mathematically and statistically sound, but it had not been updated since the 1970s. This means it was no longer current, especially when dealing with modern-day flooding. As technology has changed over the last 50 years, so has FEMA’s knowledge of flood risk and flood variables. Risk Rating 2.0: Equity in Action is a new methodology that incorporates private sector data sets, catastrophe models, and evolving actuarial science to bring flood insurance into the 21st century, where it belongs. 
2. It’s personal. Each policyholder’s premium reflects their individual property’s flood risk. No two properties are exactly alike, and neither is their flood risk. FEMA now has the capability to incorporate individual flood risk variables like flood frequency, flood types (river overflow, storm surge, coastal erosion, and heavy rainfall), distance to a water source, elevation, and the cost to rebuild, so each policyholder’s premium reflects their property’s unique flood risk. 
3. It’s equitable. For years, policyholders with lower-value homes have been paying more than they should, and policyholders with higher-value homes have been paying less than they should. Risk Rating 2.0: Equity in Action delivers premiums that are easy to understand and equitable across all policyholders based on the value of their home and their individual risk factors. In fact, 96% of all policyholders will see either immediate decreases or increases of less than $20 per month. 
4. It’s sustainable.  Floods are the number one natural disaster in the United States, and they are projected to get more frequent and severe as a result of changing climate conditions. Risk Rating 2.0: Equity in Action is a modern system developed around the realities of climate change, and it will help disaster survivors recover faster after floods. 
5. It’s taking a phased approach. Risk Rating 2.0: Equity in Action is being rolled out in two phases. For Phase I, any new policies as of Oct. 1, 2021, are subject to the new pricing methodology. Also as of Oct. 1, existing policyholders have been able to take advantage of any immediate decreases in their premiums. In Phase II, renewals of the remaining existing flood insurance policies will be written according to the new plan starting April 1, 2022. 

Assure your clients this new methodology will help bring generational change to the NFIP as we continue building a culture of preparedness, improving individual and community resilience, and advancing our ultimate goal to reduce disaster suffering. Ultimately, Risk Rating 2.0: Equity in Action will help policyholders further protect the lives they’ve built.