"It's not only the right thing to do, it aligns with the Biden administration's call to action to deliver equitable programs for all," David Maurstad, the deputy associate administrator for federal insurance and mitigation, and the senior executive of the National Flood Insurance Program, said in a briefing on the changes on Friday.
The Risk Rating 2.0 program will start on Oct. 1. The updates are expected to make 1.2 million policyholders eligible for a decrease in payments, and 90% will either see a decrease in payments, or up to a $10 a month increase, beginning next year.
The changes come as thousands of more homes in the Myrtle Beach area are expected to be threatened by flooding in the next few decades.
About 66% of those in older homes nationwide will see a premium decrease, according to materials from FEMA, which the agency said will make it so those homeowners no longer will pay more than their share for flood insurance premiums based on the value of their homes.
Under the current policy, the maximum cost for a single-family home is $45,925. That's expected to drop to $12,125.
The new system will expand the prediction of a home's flood risk by considering more variables, including the cost to rebuild, the distance to the coast/ocean/river, river class, the flood type, ground elevation, first floor height and the home's construction and foundation type. Before, the factors were flood insurance rate map zone and base flood elevation, among other factors.
Costs are expected to be lowered by $86 a month for 24% of current policyholders, will increase up to $10 a month for 66% of policyholders, increase by $10 to $20 a month for 7% of policyholders and increase by $20 or more a month for 4% of policyholders.
Maurstad called it a new chapter in the program's history that will promote equity amid climate change.
He said it will be the first time in history that policyholders will see premium rates decrease when a policy renews. He also believes that it will become simpler and easier for insurance agents and companies to provide a quote for a policy, which will lead to more agents marketing and selling it.
Maurstad expects it will also make people who hadn't purchased insurance because they didn't have to will consider it.
FEMA does anticipate that it will lose revenue due to the changes, and is working with the Biden administration and Congress on ways to address the upcoming deficit.
Maurstad said the change has had full support from the White House and the previous two administrations.