NFIP Risk Rating 2.0 Premium Hikes Linked To Sharp Drop In Flood Insurance Policies

Risk based pricing is meant to align premiums with property level flood risk and improve NFIP solvency, but this study finds a measurable downside for coverage levels. Using FEMA ZIP code premium change summaries and OpenFEMA policy transaction data, the authors estimate that Risk Rating 2.0 led to sustained declines in policies in force after implementation, with larger decreases where premiums were expected to rise more. The drop shows up quickly for new business and continues longer for renewals as capped increases phase in.

For claims adjusters, the key operational takeaway is that premium driven attrition can translate into more uninsured or underinsured flood losses over time, even in areas where flood risk is growing. That can change what arrives on your desk after an event, including more claims involving limited coverage decisions, more disputes tied to coverage start dates and lapses, and more insureds who delayed buying flood insurance until it was too late. It also raises the likelihood of more post-loss reliance on assistance programs and lender driven complications when borrowers lack coverage.

The distributional finding is especially relevant. The study reports larger relative declines in lower-income ZIP codes, suggesting affordability pressure is concentrating the protection gap in communities that already have fewer financial buffers. For adjusters and claim leaders, that supports closer coordination with agents and policy services around renewal outreach and better documentation practices, since nonrenewals, relocations, and potential shifts between NFIP and private flood may become more common as rates continue to move toward full risk based pricing.