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Increasing Policyholder DiscountsResidents of more than a dozen NFIP communities are now receiving premium discounts of 5 percent or greater, because their community joined the Community Rating System (CRS) this year. In addition, on October 1, 2006, more than 30 communities already receiving CRS discounts were able to increase them by 5 to 20 percent. One CRS community--Roseville, California--is now earning its residents the largest discount offered by the CRS: a 45-percent reduction on the annual premium paid for flood insurance coverage.Reducing premiums is a compelling strategy for boosting flood insurance sales. And, saving property and lives can be an effective way to convince taxpayers to fund mitigation projects. The CRS is a successful FEMA program designed to meet these three goals: (1) reduce flood losses; (2) facilitate accurate insurance rating; and (3) promote the awareness of flood insurance. A Class System More than 15 years ago, the CRS was created as a mitigation incentive program based on a partnership of local, State, and Federal agencies and insurance industry experts to provide flood insurance premium reductions in recognition of proactive community floodplain management efforts that exceed NFIP minimum standards. Modeled after the insurance industry's Community Fire Rating System, the CRS provides discounts in 5-percent increments for each of 10 rating classes. A community accrues points to improve its CRS class rating and receive increasingly higher discounts. Points are awarded for engaging in any of 18 creditable activities, organized under four categories:
Most communities enter the CRS as a Class 9 (earning a 5-percent premium discount) or a Class 8 (earning a 10-percent discount). However, the following communities were already engaging in so many mitigation activities that, when they joined the CRS in October 2006, they entered at class levels that earned their residents discounts of 15 to 20 percent.
Once a community joins the CRS, it can continue to improve its class rating by engaging in mitigation and outreach activities that earn it even more points. As of October 1, 28 communities improved their class by one step. Two communities--Waveland, Mississippi, and Skagit County, Washington--moved to Class 5, making their residents eligible for a 25-percent discount on their flood insurance premiums.
Some communities engaged in so many creditable activities since their last rating, that they improved more than one class. The following communities improved two CRS classes.
The community of Roseville, California, is especially notable. During this last rating cycle, Roseville, California, jumped over three classes--moving from a Class 5 community with a 25-percent premium discount, to become the first Class 1 community and earn a 45-percent premium discount for NFIP policyholders in the floodplain. 1,049 Strong, and Growing!  The CRS was implemented in 1990 with 300 communities. By October 1, 2006, the number of CRS communities had grown to 1,049, representing more than 3 million NFIP policyholders. Although CRS communities represent less than 6 percent of the 20,236 NFIP communities in the United States and its territories, they contain 67 percent of all NFIP policies in force. The accompanying bar chart shows the distribution of CRS communities in each class. Most are Class 9 and Class 8 communities. It takes only 500 points to improve class ratings. Sometimes this can be accomplished with just one or two mitigation initiatives such as providing drainage system maintenance (maximum 330 points), installing a flood warning system (maximum 225 points), keeping Elevation Certificates on file (162 points), or engaging in community outreach (maximum 315 points). Or, a community can accumulate enough points to lower insurance premiums dramatically by engaging in major activities such as acquisition and relocation of floodprone property (maximum 3,200 points) or instituting high regulatory standards for the floodplain (maximum 2,720 points). The CRS strategy is twofold: to recognize floodplain management and insurance activities that meaningfully distinguish one class of community from another, and to act as a catalyst to encourage communities to initiate new prevention activities. Since 1990, 50 percent of all CRS communities have improved their CRS classifications by undertaking more flood loss activities. For more information about how to join the CRS or how to improve the class rating and premium discount of a community that is already participating in the CRS, contact the Insurance Services Office by email (nfipcrs@iso.com) or telephone (317-848-2898). |
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Last updated on December 1, 2006
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