Flood insurance will be cheaper for more than 40 percent of policy holders in Indiana. FEMA changed how it calculates the premiums in the federal flood insurance program.
The agency said people with lower-valued homes have been paying more than their fair share of flood insurance. For decades, FEMA mostly based premiums off of whether you live in a flood zone and the property's elevation. But the new pricing system looks more at the risk to that specific home and the cost to replace it. It also takes into account more factors — like heavy rainfall.
As a result, most Hoosiers will see their premiums either go up about the same amount they have in previous years or go down. Only 7 percent of policy holders will see an increase of $10 a month or more.
Roy Wright is the CEO at the Insurance Institute for Business and Home Safety and used to work for FEMA's National Flood Insurance Program. He said FEMA's Risk Rating 2.0 is more favorable to Indiana.
“Across the country, about 23 percent of the policies are seeing immediate decreases. It's double that in terms of those who will see the decreases in Indiana," he said.
More than 280,000 properties were at a substantial risk for flooding in Indiana last year, but only about 20,000 Hoosiers have flood insurance.
Jeremy Porter is the head of research and development at the First Street Foundation. It published a report in February showing the economic impacts of underestimating flood risk in the U.S. The foundation also came out with an online tool to help people understand their risk for floods, called Flood Factor.
Porter said this new pricing system might encourage some people to buy flood insurance.
“It's likely to overall potentially drive people to buy because it'll be cheaper for the majority of people, but there are going to be this group of folks that see increases and we're not quite sure what it's going to do for those individuals," he said.
Porter said the old risk rating system didn't take into account the increased flooding we've been seeing due to climate change. That has driven the National Flood Insurance Program into debt — borrowing more than $36 billion from the U.S. Treasury to pay claims. He said it's unclear to what extent Risk Rating 2.0 will close that gap.
Indiana Environmental reporting is supported by the Environmental Resilience Institute, an Indiana University Grand Challenge project developing Indiana-specific projections and informed responses to problems of environmental change.