Message from Jim
A tentative rate policy is applied when agents/producers are unable to provide all required underwriting information necessary to rate a policy. It cannot be endorsed to increase coverage limits or renewed for another policy term until all information is received. A flood loss cannot be settled before the full-risk premium is determined. (NFIP Flood Insurance Manual, Rev. 2012)
Tentative rates are generally much higher than Regular Program rates since they are not based actuarial data. For example, a pre-FIRM single family residential non-elevated building with no basement in Zone A, using Regular Program rates, would be rated at $0.76 per $100 of coverage for the building and $0.79 per $100 of coverage for contents, up to the basic limit. If tentative rates were applied, this premium would be increased 526% to $4.00 for building and 759% to $6.00 for contents. Notice the whole dollar amounts! This is a clear indicator that without proper data, risk becomes a guess. In the NFIP Flood Insurance Manual, tentative rates for V Zone basic limits can reach $11.00 per $100 of coverage.
This is the logic behind obtaining an Elevation Certificate. It is my understanding that 90%-95% of tentative rates will be decreased with an Elevation Certificate since it allows the agent/producer to more accurately rate risk based on building construction and elevations. This is also an opportunity to evaluate whether the improvements being used for loan collateral which horizontally scale in a flood zone are a good candidate for Letter of Map Amendment Removal, or to make recommendations as to how premiums can be reduced or eliminated, if possible.
Remember, the lender or the agent cannot know if map error exists or an incorrect flood determination has been made without further investigation. In many ways, the Elevation Certificate is the best solution to better understand risk and options when horizontally scaled in the flood zone.
