This is Part 2 of a three-part series on flood insurance. The first part is here.
As you may know, the world of flood is changing. As of April 1, 2016, the National Flood Insurance Program (NFIP) is implementing changes flowing from the Biggert Waters Flood Insurance Reform Act of 2012 and the Homeowners Flood Insurance Affordability Act of 2014 (HFIAA). These affect residential and non-residential property rates, the process to communicate risk and related processes tied to flood insurance.
An Upstream Challenge for Agents and Consumers Alike
As an agent, you’re dealing with a greater focus on compliance and more regulations wrapped around the NFIP. While working to navigate increased surcharges, fees and assessments that are not eligible for commission, you’re trying to grow your business, mitigate E&O exposures and improve retention. What’s more, the federal program requires underwriting detail that is increasingly complex every day. This may feel like an upstream challenge.
The idea of rising costs and gaps in flood coverage are understandably creating questions for consumers. In the wake of historic flooding across the nation and catastrophic events such as “Superstorm Sandy,” some homeowners are unprepared and unprotected.
Exploring the Benefits of Private Flood
According to Keith Brown, president and CEO of Aon National Flood Services, “NFIP continues to serve a vital need for many Americans now and in the future. ... At the same time, no one product can meet everyone’s needs, so it’s important for independent agents to understand available private flood insurance options, as well.”
There are specific exposures the federal program doesn’t cover, such as swimming pools and spa equipment. If you live on the coast and a hurricane pushes a three-foot wall of water onto your property, the NFIP will offer coverage to help dry out the house and restore the first floor and above, but the NFIP won't cover digging sand out of the pool. What’s more, the NFIP does not cover additional living expenses or personal property in basements, so displaced homeowners or homeowners with built-out basements are left picking up these bills. Living expenses and basements are just two of the types of exposures to consider when weighing flood insurance protection options.
The good news is that private flood options are continuously coming to market. Not every homeowner has the same needs. While price is often the key factor, you’ll find there are considerations that extend beyond price. In many cases, it comes down to educating the consumer about these options.
For instance, policyholders may not be aware that they can supplement NFIP coverages with private options that allow a more customized coverage approach to address their individual needs. By adding private flood insurance to your portfolio, you can offer attractive options, such as:
- Ability to fill gaps in coverage;
- Improved loss settlement (adding replacement cost coverage to all losses);
- Reduced pricing;
- Broad eligibility;
- Shorter wait periods before coverage becomes effective;
- Coverage availability in all flood zones for single- and two- to four-family homes;
- User-friendly application process; and
- Possibly eliminating the need to purchase expensive elevation certificates.
