FEMA somewhat proudly announced that the Risk Rating 2.0 of the National Food Insurance Program would cause them to lose about a million subscribers. Risk Rating 2.0 is the pricing methodology the NFIP uses to set flood insurance premiums, and also includes more flood risk variables. Essentially, it’s making flood insurance unaffordable for Louisianians. New home flood insurance policies are traditionally $500 - they’re now $5000 or even $9000 in some areas of South Louisiana. GNO Inc. President and CEO, Michael Hecht and St. Charles Parish President Matt Jewell joined me on the show to discuss their thoughts on the finer points of Risk Rating 2.0 and their effort to amend it for South Louisiana residents.
Recently, I asked a real estate agent whether interest rates were squelching home sales - he told me it’s insurance costs that are causing home buying to lag.
MJ: We're getting to a point where you're going to be paying much more for your home insurance than your mortgage. It’s not a good place to be in right now. We do have the entire Louisiana congressional delegation trying to make changes to the Risk Rating 2.0.
Where are you seeing the biggest increases in insurance premiums?
MJ: It's hard to tell because FEMA will not give the model to any of the elected leaders. If you take a look at Southeast Louisiana, particularly New Orleans, it’s better protected now than it has ever been. Basically, FEMA is now saying they looked at this all wrong, we know you’re better protected, and we built this hundred year storm protection system, but we’re still going to charge you more.
MH: Matt's part of this national group - the Coalition for Sustainable Flood Insurance - that is continually talking to FEMA about the problem with the new Risk Rating. We believe FEMA did not include the $15 billion improvements to flood protection after Hurricane Katrina in Risk Rating 2.0. If that’s the case, it not only means that we're discounting the $15 billion that was invested by the American people, but it means that their methodology is just totally wrong. We're questioning the fundamental methodology of what they're doing,
But what's this double secret probation approach by FEMA? Are we getting punished for something?
Essentially, FEMA paid a private company to make a risk model for everybody in the NFIP program. They're telling you it's proprietary, so we can’t show you. My concern is that we've paid for this with taxpayer dollars, and you're now saying it's a private document.
Have y’all looked at neighboring homes with slightly different flood protections? What’s the difference between a home built on a slab and the one next door built on wooden piers?
MJ:The home on piers would have a lower flood risk than the home on the slab, so the premium should be lower, but there's so many other factors. I found out that Risk Rating 2.0 doesn’t even include the west bank levee of St. Charles Parish, they only included portions of it.
MH:.The way this should work is like your credit score. Your credit score is holistic and takes
a number of factors into account. We might not like it, but we can understand from credit score websites what is impacting our credit score. Our credit is impacted if we open up a new credit card or miss a payment. Risk Rating 2.0 should exist in the exact same way.
