What is Risk Rating 2.0 – Equity in Action?
Since the inception of the National Flood Insurance Program (NFIP), flood risk has largely been determined by a property’s elevation relative to the flood plain. In this age of Big Data, a trove of information is now available to better assess a property’s individual risk of damage and need for repair.
 
Enter Risk Rating 2.0, dubbed Equity in Action. It’s an overhaul of FEMA’s system to calculate flood risk and premiums with a goal to more fairly price flood insurance and increase accessibility.
 
How does the NFIP calculate flood insurance?
Previously, two different homes at identical elevation were assessed an identical insurance cost. Risk Rating 2.0 recognizes that these two homes may be alike only in their elevation, but several others factors can vary widely, and are now considered in the individual risk calculation:

• Distance to flooding source

• Flood type

• Building occupancy

• Construction and foundation type

• Ground elevation and first floor height

• Number of floors

• Prior claims

A property’s likelihood of flood, the cost to repair an individual home, and mitigation efforts to reduce flood damage also come into play, and likewise may be starkly different between neighbors. Risk Rating 2.0 seeks to right-size premiums to reflect such differences.
 
What factors into the cost of NFIP flood insurance? – Watch this overview video from FEMA.
 
Is there a flood insurance calculator? Will my clients see a rate increase?
It depends. You can view state-by-state breakdowns of the estimated changes to flood insurance premiums under Risk Rating 2.0, by visiting the FEMA website. Nationally, FEMA estimates moderate changes on average as:

• 23% of policyholders will see an immediate premium decreases

• 66% of policyholders will see an increase of up to $10 per month

• 7% of policyholders will see an increase of $10-$20 per month

• 4% of policyholders will see an increase of more than $20 per month

If 2/3 of policyholders will see no more than a $10 per month increase, why am I hearing horror stories of premiums doubling, or more?
 
In a recent Wall Street Journal article, a Florida couple shared that their annual NFIP premium is set to skyrocket from $441 to $4,986. Of course, such a leap would be cause for concern on an individual basis. The above estimates are for average NFIP premium increases. To get the actual premium for an individual client’s property under Risk Rating 2.0, you’ll have to quote them as a new policy.
 
If you have a client facing a steep increase, some good news is that those price changes are capped at 18% annually. The premium will still increase year-over-year until it hits the new mark under Risk Rating 2.0, but there is a limit to how quickly you’ll get there. Additionally, these new rates for renewals don’t go into effect until April 1, 2022.
 
Are private flood insurance premiums also increasing?
Not for us. Risk Rating 2.0 will NOT impact Aon Edge and our EZ Flood program rates. Depending on how your clients’ rates are changing under Risk Rating 2.0, EZ Flood may offer savings over the NFIP. Other benefits to EZ Flood include:

• Streamlined application with only 12 underwriting questions

• Convenient DocuSign capabilities for a complete virtual experience

• No elevation certificate or photographs required

• Accepted by over 3,000 lenders

• No waiting period

• Coverage for catastrophic ground collapse

• Optional Additional Living Expenses (ALE), food spoilage and swimming pool clean-up coverage

• Instant policy issue for eligible risks 

You can download an EZ Flood Sales Sheet here.

EZ Flood May Be the Solution You’re Looking For
There hasn’t been a better time to consider private flood insurance through Aon Edge and EZ Flood. Find out what your client’s new rate will be under Risk Rating 2.0, and contact us to get an EZ Flood quote. EZ Flood provides comprehensive, customizable coverage, so you can offer your clients more choices for deductibles and limits on property and personal items coverage.
 
Aon Edge Insurance Agency, Inc. is a licensed producer in all states. (TX Lic# 1339727) (CA Lic# 0E67797); Insurmark is a division of Financial & Professional Risk Solutions, Inc.
 
_{This article is provided for general informational purposes only and is not intended to provide individualized advice. The article is not a replacement for any NFIP publications. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy}