New national flood risk rating rating system proving to be a success story
On
While some may be skeptical, there can be no doubt about the effectiveness of Risk Rating 2.0 in measuring risk, especially in instances where it has been proven correct by Mother Nature herself. In one specific example, what may not have appeared like a logical premium adjustment under Risk Rating 2.0 made sense after a major flood.
In the town of Marshfield, there are dozens of inlets buffered by the marshes the town is named after. Marshfield is a town with two major tidal rivers and over 5 miles of
Six houses span the ridge, with the outermost house sitting on the peninsula where the ridge ends. The first house on the ridge remains somewhat protected by marsh and natural land. These two homes are only about 800 feet apart but have drastically different flood exposures.
The first house on the ridge, a more inland home, is elevated on a 2-foot crawlspace and has a
Neighborhoods at risk: Flood, climate hazards threaten Quincy, state's redlined neighborhoods
Surge protectors:
Here's how Risk Rating 2.0 works
However, Risk Rating 2.0 takes a different approach to rating. By looking at distance to water, elevation, replacement cost and other rating factors, the first more inland home on the ridge is projected to see a NFIP Risk Rating 2.0 premium of about
When looking at the two structures, it doesn't appear to make sense why a building that is relatively new construction elevated 5 feet above the ground with proper flood openings would see a projected threefold premium increase. In turn, it also doesn't appear to make sense on why a building only 800 feet away on a 2-foot crawlspace would see a premium cut in half. However, a recent significant nor'easter event flooded the ridge. The results show how Risk Rating 2.0 got the risk right.
The outermost home out on the ridge, sitting on the peninsula facing the open mouth of a tidal river, suffered no flood damage to the first livable floor, but water came to within 6 inches of the first floor and was surrounding almost the entire building.
The first, more inland house on the ridge, while only 800 feet away and still exposed to marsh flooding, remained dry and water did not get closer than 50 feet to the building.
This is only one story about premiums changing under Risk Rating 2.0 to better reflect flood risk. There will be situations where Risk Rating 2.0 never gets put to the test. The important takeaway with Risk Rating 2.0 is that the new rating methodology more effectively communicates risk and rates premiums in a way the NFIP never has before.
Explaining stories like this to insureds will be the first step in providing assurance that now there is some certainty that the rate more accurately reflects the risk.


AM Best Affirms Credit Ratings of Dhipaya Insurance Public Company Limited
AM Best Downgrades Credit Ratings of Members of NLC Insurance Companies Pool
Advisor News
- Could a narrower focus help grow your practice?
- U.S. debt hits $40 trillion: how to support concerned clients
- Flourish brings private-bank-like cash solution to MassMutual’s network
- Majority of Americans concerned recent market highs are unsustainable
- GLP-1 users choose between medication and retirement saving
More Advisor NewsAnnuity News
- MassMutual Expands Lending Options With New Secured Credit Line
- Corebridge Financial Introduces Progressive Trigger, a First-of-Its-Kind Index Annuity Strategy Designed to Turn Missed Years into Future Opportunity
- Insurer proposes $1.1M deal to resolve CA teachers’ annuity fee lawsuit
- IMOs get frustrated with slow carrier adoption of faster technology
- New class-action lawsuit targets Delaware Life over annuity disclosures
More Annuity NewsHealth/Employee Benefits News
Life Insurance News