Big changes are coming to flood insurance, and they’ll affect almost everyone in Louisiana. Under FEMA’s Risk Rating 2.0, most current NFIP policy holders in the Greater New Orleans area will receive increases to their flood premiums limited to 18% per year until they reach their new actuarial rate.
New policies are written at full rate as of October 1, 2021, with most rates increasing dramatically.
Maggie Talley, floodplain manager in Jefferson Parish, estimates the average Zone X — areas designated as “moderate flood hazard” — rates in her parish will rise from $572 to $1,988. Talley believes that many NFIP policy holders in X zones in Jefferson Parish may drop flood coverage in the face of increased rates, representing a potential of more than $30 million in lost premiums in Jefferson Parish alone.
Additionally, new construction projects written under RR2.0 are seeing flood insurance rates far above 2021 levels which is already having a “dramatic chilling effect on building,” said Dan Mills, CEO of the Home Builders Association of Greater New Orleans. “New rates are averaging over $220 per month on properties that were previously less than $50 per month,” Mills said.
There are also concerns about the impacts on those with fixed incomes, especially those who participated in FEMA mitigation programs to raise their homes and are legally obligated to participate in perpetuity in the NFIP program or repay FEMA for funds used in the mitigation process.
“Some fixed income residents could be priced out of their homes,” Mills said.
In New Orleans, where affordable housing is often difficult to access, flood insurance rates, coupled with increasing homeowner policy rates and property taxes, could mean the maximum affordable payment amount for the average salary in the region may be exceeded in escrow before one dollar can be allocated to land or improvement. In other words, the cost of compliance may become too high to qualify for affordable housing in our region.
Because FEMA chose to use its authority to adjust rates without publicly vetting the rate changes, many people may not realize how big of a rate increase they may soon be facing. Some may not even be aware of any rate increase. To date, FEMA has only made limited efforts to conduct any sort of public information campaign to ensure taxpayers clearly understand the far-reaching impacts these changes will have on their communities. As such, the burden of informing NFIP participants of these rate changes has rested on one industry: insurance agencies. Risk Rating 2.0 represents the most sweeping change in flood insurance rates and the NFIP in decades and there has been woefully little public outreach by FEMA. Spread the word!
Keep your flood insurance in force to keep the statutory limit increases per year. Utilize elevation certificates to see if you are entitled to a discount. Review your new declarations pages at renewal to confirm correct replacement cost, square footage, foundation, etc. If your property is your primary residence, make sure the fee you are being charged is $25 and not $250. Double check to see if the questions regarding your appliances and machinery/equipment are answered correctly. If there is a discrepancy, make sure to contact your agent.
Casey Duplantier, producer at Alpha Insurance Agency
Lacey Osborne
CEO
St. Tammany Chamber of Commerce
It’s important to stay up to date on all the new changes. We are sharing the information we get in our updates and on social media. GNO, Inc.’s leadership in forming the CSFI — Coalition for Sustainable Flood Insurance — continues to be our main source of information.
Dan Mills
CEO
Home Builders Association of Greater
It’s very important to renew your existing policy and avoid any lapse. While existing policies will increase by 18% annually, new policies are written at full rate today… In the past, raising a home could provide predictable premium relief, but it appears these measures have little effect under new rating rules.
