The Federal Emergency Management Agency will soon take a new approach to flood insurance rates that should result in decreased costs for most policyholders.
The new risk rating methodology is expected to reduce premiums for two-thirds of policyholders across the country, according to FEMA, and individuals will no longer have to pay “more than their share” in flood insurance coverage based on a home’s value.
Policyholders will pay a rate proportionate to their property risk, said David Maurstad, senior executive of FEMA’s National Flood Insurance Program.
“We’re moving away from the 1970s rather static measurement [of] just looking at the property’s elevation within a zone on a flood insurance rate map,” he said, adding FEMA will now incorporate a number of flooding variables.
Maurstad also added there’s greater transparency to how the program is funded.
The current rating system takes into account variables including the flood insurance rate map zone, base flood elevation, foundation type and structural elevation in special flood hazard areas only.
The new risk rating methodology, which will begin Oct. 1, takes into account the cost to rebuild, as well as distance to the coast, ocean and river, river class, flood type, ground elevation, first floor height and construction or foundation type.
The change at the national level will most certainly impact Horry County — an area prone to flooding particularly in the Socastee, Bucksport, Loris, Longs and Conway areas located along the Waccamaw River and Intracoastal Waterway.
“The methodology is unique to each individual property,” said April O’Leary, leader of Horry County Rising. “It’s data driven, it’s science driven.”
O’Leary said Horry County Rising supports FEMA’s new methodology and the organization was part of the drafting process for the risk rating system several years ago.
“ I don’t think it’s the end-all, be-all,” O’Leary said. “It's a better understanding of flood risk and the unique property you own and what the flood risk could be. Half the battle is knowing how high your risk is.”
With updated FEMA flood maps effective in December, more properties are expected to be added to flood zones.
O’Leary encourages all Horry County residents to have flood insurance.
“Every flood event is unique,” she said. “You can flood even without necessarily a tropical storm. If you live in Horry County, you should have a flood insurance policy. It doesn’t matter how close you live to water.”
And the more people who have flood insurance, the more likely premiums will decrease, she added.
In a news conference Friday, FEMA officials said more than 45,000 policyholders in the country are seeing increases of more than $100 a month to their premiums under the current system and no policyholders are seeing a decrease. However, under the new rating system, about 196,000 people will see their premiums decrease by more than $100 a month — or $1,200 a year — while only 3,200 policyholders will see an increase.
Under the current rating system, each year policyholders on average see an increase of $8 per month, according to FEMA data.
About 23% of current policyholders could see an immediate decrease of $86 per month under the new system, 66% of current policyholders will see on average $0 to $10 increases per month, 7% will see a $10 to $20 increase per month, and 4% will see a more than $20 increase per month.
FEMA records state that under the current methodology a single-family home maximum policy costs $45,925, while under Risk Rating 2.0 it will cost $12,125. “Policyholders paying the most under the current methodology will see dramatic decreases when they transition to Risk Rating 2.0,” according to FEMA.
The first phase begins Oct. 1 with new policies rated under the new methodology, as well as existing policyholders eligible for renewal to take advantage of immediate decreases, according to FEMA’s website.
In the second phase, remaining policies renewing on or after April 1, 2022, will be subject to the new rating method, according to FEMA.