Agents, did you know that if your community is proactive about floodplain management, it can help you sell policies and help your clients keep their costs down?
What is the Community Rating System?
The National Flood Insurance Program’s (NFIP) Community Rating System (CRS) is a voluntary incentive program for communities. The CRS rewards communities by recognizing community floodplain management activities that exceed the minimum NFIP requirements. Through the CRS, flood insurance premiums are discounted for policyholders in communities that participate in the CRS. Flood insurance premium discounts are provided because the community actions reduce the risk of flood damage and otherwise contribute toward the three goals of the CRS, shown below:
- Reduce flood damage to insurable property;
- Support the insurance aspects of the NFIP (such as actuarial rating and policy coverage); and
- Encourage a comprehensive approach to floodplain management.
How does the CRS work?
Under the CRS, communities earn points for each activity they conduct that works toward one or more of the goals listed above. There are about 75 local actions that can earn credit, arranged under four categories:
- Public Information,
- Mapping and Regulations,
- Flood Damage Reduction, and
- Flood Preparedness.
CRS communities are assigned a CRS Class rating, depending upon the number of credit points they earn. There are nine CRS Classes, with Class 9 requiring 500 points and CRS Class 1 requiring 4,500. The insurance premium discounts are based on the CRS Class. The lower the class, the higher the benefits.
CRS discounts may differ in the high-risk Special Flood Hazard Areas (SFHAs). Remember to clarify this information for your clients.
Helping Agents Help Property Owners
All CRS Communities must maintain Elevation Certificates. How can an agent writing flood insurance use the CRS to help sell policies and assist his or her customers? Here is one example: All CRS communities must obtain completed FEMA Elevation Certificates and floodproofing certificates for all new and substantially improved construction in the SFHA after the community has joined the CRS. The Elevation Certificates must be maintained in an accessible format and made available upon request.
This allows for more accurate insurance policy rating early in the rating process, and homeowners will not have to pay to hire a surveyor or an engineer to do a new survey. Some CRS communities receive credit for maintaining certificates on all Post-FIRM buildings constructed before entering the CRS. If the community does receive CRS credit for conducting this activity, then these certificates also are available to agents writing flood insurance and to property owners. Keep in mind that the community may charge a small fee for copying certificates.
Communities assist with Flood Insurance Rate Map inquiries. Nearly all CRS communities receive credit for providing information from the community’s FIRM to inquirers. This includes a property’s flood risk zone and the Base Flood Elevation (BFE) if listed on the FIRM. The map information service must be publicized once a year. If a community is receiving this credit, then agents should be
able to use the service to obtain specific information about a piece of property.
The CRS benefits everyone in the community, including agents.
Knowing your community’s CRS Class and the benefits can help you bring down premium costs for your clients. To find out if a community participates in the CRS, and its CRS Class , consult the NFIP Agent Manual CRS chapter and click on “Community Rating System” to access a list of all towns and counties that participate in the CRS. Information on CRS Class rating and the percentage discount policyholders receive is also provided.
For CRS-participating communities, flood insurance premium rates are discounted in increments of 5%; i.e., a Class 1 community receives a 45% premium discount, while a Class 9 community would receive a 5% discount. (A Class 10 community is not participating in the CRS and receives no discount.)
If your potential clients live in or own property in a CRS-participating community, they can purchase discounted flood insurance policies. All potential buyers like to hear that, so it can be easier to sell the coverage. That is a good thing, because everyone needs protection from floods. Being in a CRS community benefits everyone. Everyone is safer. Insurance costs can be lower. Those are results to be proud of.
Some CRS communities have steering committees that advise the community on topics related to citizen outreach, floodplain management planning, and promotion of flood insurance. Agents can have a lot to offer these committees and are encouraged to show an interest in participating if needed. Agents would no doubt learn a lot about the mitigation goals of a community by volunteering for these committees.
Links to information:
More information on the NFIP CRS Program can be found at http://www.fema.gov/business/nfip/crs.shtm.
The fully revised NFIP Flood Insurance Manual is available online at http://www.nfipiservice.com/pdf/may2011_revised/index.pdf. The CRS chapter can be found there.
For more information about the National Flood Insurance Program, visit http://www.fema.gov/about/programs/nfip/index.shtm.
For more information about FEMA, visit http://www.fema.gov/.