The Biggert-Walters Flood Insurance Reform Act in 2012 was supposed to take the National Flood Insurance Program out of the dark red deficit but the fine print caused an incredible outcry as flood insurance rates sky rocketed. Check out our post, Will Flood Insurance Rate Submerge Tampa Bay?
While the NFIP rate increases were eventually scaled back and the annual increase is limited to 18% per year, that is a huge increase for policyholders that can happen over and over again. And this increase only allows the insured to have the standard NFIP policy that offers bare bones coverage. The Superstorm Sandy claims arising from NFIP policies made national headline news as those claims were mishandled. The mishandling and fraud in the engineering reports was covered in our prior post, Unethical Claims Cultures Promote Outcome Oriented Expert Reports:
- Improper alteration of reports prepared by licensed engineers without the engineers’ authority or consent;
- Use of unlicensed engineers to inspect properties for flood damage;
- Use of uncertified engineering companies to perform engineering analyses;
- Improper attempts to obtain ratification from engineers on improperly altered reports; and
- Inadequate investigation by and/or collusion with WYO carriers, adjusting companies, and FEMA regarding these improper engineering practices.
More details about the Sandy flood claims were also outlined in our prior posts:
Florida sought a solution to NFIP insurance and with the backing of Senator Brandes, passed legislation that allowed Florida’s insurance companies the ability to sell a tailored and specific flood insurance policy.
Interestingly, a conference was held earlier this month about the flood options for private carriers looking to insure more average and modest homes. One hundred-fifty insurance and reinsurance companies came together in St Petersburg to determine the risk in Florida according to The Tampa Bay Tribune. Read the TBT article here.
Homeowners Choice Property and Casualty Insurance Company has been writing endorsements to its standard homeowners policy and now is truly in the market of selling a stand-alone flood policy. This offers Floridians more of a choice but why is this the new plan and will it work?
While massive floods in the 1960’s along the Mississippi River that caused many carriers to stop the flood business are now a distant memory the floods of Superstorm Sandy should still be fresh data for the insurance companies to consider. However, the reports coming from the December conference show there is money to made by selling flood insurance in Florida. We just have to hope that claims are actually paid.
Kevin McCarty spoke at the conference and offered his assurances:
But the fact of the matter is we are in strong position, our companies are strong, they’re in a position to pay claims, rates are going down, and there’s plenty of capacity in the reinsurance market to help fund a private flood program that will not benefit only Floridians but the country.
While McCarty may have a point about the re-insurance, Floridians complain they have seen an insurance increase and not a decrease in premiums and whether a company can pay claims is different than actually cutting the proper checks.
Clearly, many policyholders are paying much more for less homeowners coverage in Florida and while the national flood coverage is limited, a new company would not be trying to sell you a flood policy unless the models and data show they can turn a profit. According the OIR, there are seven companies in Florida offering private flood insurance. Seven companies will offer Floridians more options but it is too soon to know the real benefits, and only time will tell.