Who will be impacted most by FEMA's new flood insurance pricing method?

CHARLESTON, S.C. (WCBD) - FEMA's new flood insurance pricing methodology under the National Flood Insurance Program could change how much homeowners in Charleston pay for flood insurance.

Mark Friedlander, a spokesperson for the Insurance Information Institute, said the new method, Risk Rating 2.0, is an update to a system that was antiquated and bleeding money.

"Last year the national flood insurance program was $20.5 billion in debt," he said. "It has never operated in a positive sense -- it has always operated in deficit."

The changes went into effect in October 2021 and Risk Rating 2.0 has been implemented in phases through April 1, 2023.

Before Risk Rating 2.0, flood insurance rates were determined by a property's geographic zone and elevation. Mark Friedlander, a spokesperson for the Insurance Information Institute, explains that this meant some communities were rated the same despite their home size.

"So say the whole community has homes ranging in price from $100,000 to one million -- the $100,000 people might be paying the same rate of flood insurance that the million dollar homeowners pay -- clearly not a fair system," he explained. "Risk Rating 2.0 is supposed to be a fair equitable system."

According to FEMA, under Risk Rating 2.0 a homeowner's flood insurance rates are now determined by their individual risk based on several factors including:

* Likelihood of flood events

* Building characteristics

* Elevation and distance from flood sources

* Replacement cost value

* Ways a building is adapted to withstand floods (such as flood vents)

* Levee performance

Charleston's Stormwater Director, Matthew Fountain, said they can't be exactly sure who will be most impacted by Risk Rating 2.0 because the process behind determining the rates has not been disclosed.

"The intent is not necessarily a bad intent," said Fountain. "But without knowing the details of the algorithm and having more data it's hard to give a firm opinion on how it actually worked."

In Charleston, Fountain said larger properties on the southern peninsula will most likely see changes, but there could also be concerns for lower-income areas.

"If you start increasing insurance rates on those residents who might not have the ability to pay -- what do you do?" he said. "Are you gentrifying those areas and pushing people out of those areas?"

That's why several states including South Carolina are suing the U.S. government because they believe some people could be priced out and turn away from getting insurance coverage.

It's a concern for a city, like Charleston, where flood insurance is a necessary protection even for those in a flood plain.

"We still very strongly recommend you get flood insurance because there is always that rainfall risk that isn't being mapped for," Fountain said.

However, Friedlander said there is some good news for homeowners. Under Risk Rating 2.0, flood insurance premiums cannot go up more than 18% in a year, and there are proposals in Congress to help subsidize lower-income families for the coverage.

"Bottom line is, we don't want to see anyone go without flood insurance," he said. "Flood is the number one hazard across the U.S., 90% of all natural disasters in the country involve flooding."

Friedlander said homeowners do not have to go through the National Flood Insurance Program for flood insurance. He also reminds them to shop around for the best price or add flood insurance coverage to a home insurance policy.