Flood insurance rates are rising Oct. 1. What it means for MS Coast homes, businesses
There’s one thing property owners with flood insurance need to know with rates on new policies set to rise on Friday, Oct. 1.
“If you do have a policy, don’t let it lapse,” Patricia Latshaw, senior vice president of compliance and agency training at Wright Flood, told the Hancock County Chamber of Commerce during a virtual discussion Wednesday morning.
That’s because the new rates will be higher for most property owners, as FEMA’s National Flood Insurance Program adopts a new risk rating system that is expected to raise premiums for about 80% of customers. The new system is called Risk Rating 2.0.
But for those with existing policies, rate increases will be capped at 18% or 25% annually, and the new rate won’t kick in until April 2022. Premiums will then rise each year until customers are paying their new rate under Risk Rating 2.0.
For that reason, those with current policies need to make sure they don’t lapse if they want to lock in lower rates.
Guest host Angelyn Treutel Zeringue, owner of SouthGroup Insurance Services, said that property owners can contact their insurance agents now, but information about their new rates may not yet be available.
“When you get your renewal in, is when you’ll be able to see what it’s looking like and if you need to look at other options,” she said.
What Coastal Mississippians should know
Latshaw said Risk Rating 2.0 is designed to bring the NFIP “into the 21st century.” The previous system is based on measurements that haven’t changed much since the 1970s, and FEMA says Risk Rating 2.0 takes into account more variables to create more equitable rates.
“Currently, policyholders with lower-valued homes are paying more than their share of the risk while policyholders with higher-valued homes are paying less than their share of the risk,” the agency’s website says.
The new rates take into account climate change and its consequences like sea level rise.
It’s also designed to keep the program solvent: It owes about $20 billion to the U.S. Treasury.
An analysis by QuoteWizard found that 84% of Mississippians will be paying higher premiums, above the national average of 77%. The average annual cost in Mississippi is currently about $800, and around 8% of households have flood insurance, the company found.
Zeringue mentioned a home for which flood insurance now costs about $500 a year. With Risk Rating 2.0, the rate rose to $1,800.
“That is so extreme — we kind of feel like we’re being picked on,” she said. “Can you address that a little bit?”
“I know,” Latshaw responded. “But you’re not being picked on... It’s not just coastal communities.”
She added that the higher rates may also help people better understand their true risk of flooding and make decisions accordingly.
What’s going on in Congress?
Mississippi Sen. Cindy Hyde-Smith (R) issued a press release Wednesday announcing that she is co-sponsoring legislation to delay the implementation of Risk Rating 2.0 by a year, until Sept. 30, 2022.
Last week, she and colleague Sen. Roger Wicker were among a bipartisan group of senators who sent a letter to FEMA Administrator Deanne Criswell, asking the agency for a delay.
The senators expressed concern that steep premium hikes could cause people to drop their flood insurance.
“It is our understanding that internal analysis shows that FEMA estimates roughly 900,000 policyholders, or nearly 20% of all policyholders, will drop out of the program over the next 10 years in large part due to unaffordable premiums under Risk Rating 2.0,” they wrote.
It’s not yet clear what will happen with Hyde-Smith’s legislation.
“You never know what Congress is gonna do,” Latshaw said.
Democrats and Republicans in Congress need to reach an agreement by Thursday to prevent a government shutdown.
Latshaw said it’s not clear how a shutdown the day before the scheduled rollout of Risk Rating 2.0 for new policies could affect the program.
