The Federal Emergency Management Agency (FEMA) recently put out a request for public comments on the National Flood Insurance Program’s (NFIP) Community Rating System. People have the opportunity to submit a comment until October 22, 2021.

The Community Rating System (CRS) dates back to 1990 when FEMA wanted to encourage communities to improve floodplain management with financial incentives.

Cities, counties, towns and other communities that participate in the CRS and implement effective floodplain management systems that exceed FEMA’s standards earn CRS credits. Those CRS credits are applied to reduce the NFIP premiums people who reside in those communities need to pay for their coverage.

As of April 2021, only about seven percent of all communities that utilize NFIP currently participate in CRS. The communities that do participate also happen to be some of the most populous, meaning about 70 percent – or 3.6 million NFIP policies – receive a CRS discount.

The current CRS discounts is based on “classes” of floodplain improvements. Classes are determined by a community’s credits. People living in Class 1 communities, the highest class, get 45 percent discounts on their NFIP premiums.

Some examples of the activities that can qualify a community to receive the CRS discount include:

• Public information campaigns about local flood risks, flooding mitigation strategies and the importance of getting flood insurance
• Limiting development in local floodplains
• Adding flooding protection infrastructure to existing development in at-risk areas  
• Reducing flood damage
• Establishing flood preparedness protocols
• Creating a flood warning system
• Developing dam safety projects

Communities can also get a boost to their credits based on the actions of state and regional agencies.

Credits are awarded for each eligible activity that’s verified by the NFIP, and the class of discount is awarded based on the sum of those credits.

Do Florida Home and Business Owners Benefit from CRS?

The majority of Florida’s communities – 75 percent – are Class 8, Class 7 or Class 6 (10 percent, 15 percent and 20 percent annual discounts). About 15 percent of Florida communities qualify for a Class 5 or better discount.

Ocala is the only Class 3 community in Florida, which means Ocala residents get a 35 percent annual premium discount.

You can see what type of CRS discount your community is getting on this site.

Why Is the NFIP Seeking the Public’s Input on CRS?

Although the natural phenomenon of flooding hasn’t changed, our understanding of them has progressed since the program was first proposed 30 years ago. It doesn’t seem as if this request for comment is seeking input on the premiums Florida homeowners and others must pay each year. Instead, FEMA wants to determine:

• How today’s understanding of flood risk and effective mitigation practices can be used improve the system
• Whether there’s a better way to incentivize both NFIP policyholders and the communities in which they reside to adopt flood prevention improvements that will lower their claim risk
• Methods to reinforce the financial stability of NFIP

That likely means they want to tweak the activities that award credits. Some activities that were viewed as adequate in the past may no longer be considered optimal today. There are likely new improvements or different flood risk factors that weren’t being considered previously in credit calculations.

FEMA’s review of CRS has also been spurred in part by Biden administration executive orders pertaining to climate change, equity and the environment.

Keep in mind that, like any insurance provider, one of the National Flood Insurance Program’s goals is to reduce the number of claims they must pay each year for flood damage. That’s actually good news for policyholders. Your Florida flood insurance premiums will have to go up if more flood claims are being filed each year. The fewer flood claims that are paid the lower your premiums should be – at least in theory.

Do You Have Thoughts on the Community Rating System?

You can learn more about the CRS and FEMA’s request for public feedback on the National Archive’s Federal Register. If you have thoughts on the equitable fairness (or unfairness) of your Florida community’s discount, you can make your voice heard here.