NFIP Rate Increases

From FEMA transcript and link to their video.

View in FEMA Multimedia Library

TRANSCRIPT

Change continues to come to the National Flood Insurance Program this spring.  Some of the changes result from the continued implementation of the Homeowner Flood Insurance Affordability Act of 2014 and the Biggert-Waters Flood Insurance Reform Act of 2012. 

This video will review NFIP Program Changes discussed in Write-Your-Own bulletin w-16071.

You can download copies of this and other bulletins by going to nfipiservice.com. The April 1st Flood Insurance Manual is available for a free download at fema.gov.

So, let’s go ahead and get started.

Highlights of the program changes effective April 1, 2017 include the following:

Updated premium rates conforming to the premium rate caps established by Biggert-Waters and the Homeowner Flood Insurance Affordability Act;

 Updated premium multiplier tables for policies rated under the Newly Mapped procedure; and

Clarifications for policy rating and loss adjustment for Pre-Flood Insurance Rate Map substantially improved properties.

One other item to single out from the bulletin is the next scheduled update to the Community Rating System Eligible Communities list. It is effective May 1st.

Let’s first review the impact of premium increases and surcharges. 

Overall, premiums will increase from an estimated average of $827 per policy to $878, for an average increase of 6.3%. Now, these amounts do not include the Homeowner Flood Insurance Affordability Act surcharge or the Federal Policy Fee.

When those are included, the total amount billed the policyholder will increase from $953 to $1,005, for an average increase of just 5.4%.

Just as a reminder, the premium increases effective April 1st, comply with all the requirements of both Biggert-Waters and the Homeowner Flood Insurance Affordability Act.

Premium rates for four categories of Pre-FIRM subsidized policies must be increased 25% annually until they reach full-risk rates. Those categories consist of:

Non-primary residential properties

Business properties

Severe Repetitive Loss properties, which includes cumulatively damaged properties, and;

Substantially damaged or substantially improved properties;

Also, the average annual premium rate increases for all other risk classes are limited to 15% while the individual premium rate increase for any individual policy is simultaneously limited to 18%; and the average annual premium rate increase for all other Pre-FIRM subsidized policies not covered by the first categories mentioned must be at least 5%.

Now, there are some limited exceptions to the 18% cap on premium rate increases for individual policyholders. These include policies on the properties that are subject to 25% annual premium rate increases. These also include premium rate increases resulting from changes in the Community Rating System class, misratings, and increases in the amount of insurance purchased. The specific scenarios that constitute a misrating are described in the Flood Insurance Manual.

When premium rate increases are evaluated for compliance with these caps, the building and contents premium, the Increased Cost of Compliance premium, and the Reserve Fund Assessment are all included.

However, the probation surcharge, Federal Policy Fee, and Congressionally-mandated surcharge are not considered premium and, therefore, are not subject to the premium rate cap limitations. As a result, the increase in the total amount charged a policyholder may exceed 18 percent in some cases.

Finally, for policies issued on or after April 1, there will be no changes to the following:

Deductible factors

The Federal Policy Fee

Reserve Fund Assessment percentage

HFIAA Surcharge amount

Probation Surcharge amount, and

ICC premiums

More specific information about premium increases related to certain flood zones and rating methods can be found by reviewing Attachment A of bulletin w-16071.

Thank you for reviewing this video segment on premium increases and surcharges. For more April program changes information, please see the other video segments posted to this site.

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