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Agents are Welcoming Private Flood Insurance

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Agents are Welcoming Private Flood Insurance

By: Adam M. Matheny

On the Rise

Private flood insurance is becoming more sought after, and more carriers are offering it as a result. For claims adjusters, this spells new opportunities—and perhaps a streamlining of the claims process. In fact, the number of property owners adding flood insurance policies has doubled for some insurance companies, like Munich Re.

Poulton Associates, which sells alternatives to the National Flood Insurance program, provided by private companies, will be transitioning to provide flood coverage as an addition to every policy they offer.

It’s no secret to the industry that private market flood premium collection is on the rise; according to the National Association of Insurance Commissioners, directly written premiums have increased $376 million from 2016 to 2018. Flood insurance as a surplus line isn’t included in this figure, but it is on the rise as well.

Part of the rise, at least in some states, is the fact that certain obstacles for private flood insurance have been removed. For example, in Florida, new rules have been put into place that allow carriers to certify that their policies equal those in the federal program. This helps satisfy lenders. Also, there have been new federal rules adopted to require lenders to accept policies sold by private insurance companies so long as they offer coverage equal to the federal programs.

Expanding Flood Protection

Companies and agents are beginning to recognize that flood insurance shouldn’t necessarily be packaged as a standalone product. This understanding comes as the result of consumer pressure; property owners have observed the fallout from events like flooding in Louisiana and Hurricane Harvey—where well over half of losses weren’t covered by traditional insurance policies.

Companies are recognizing the fact that making flood insurance an option with standard policies helps sell more policies, and as more companies adopt flood insurance as a given, it’s become impossible to remain competitive without offering it. Multiple companies are finding ways to capitalize on this, like Poulton Associates, which is in a partnership to develop a software program capable of providing quotes for flood insurance for full books of business.

Munich Re has made similar moves with an aggressive push to expand flood protection policy endorsements in moderate and even low risk areas, where it is not yet a lender requirement—and it’s working. One project leader for the company says that their take-up rate has increased a full 100% over the past 12 months.

A New Era

The changes set the stage for many new opportunities, but it’s worth remembering that the industry isn’t very experienced with private flood claims and its ability to handle them has yet to be tested.  The belief that working through a single agent and claims adjuster will benefit consumers is strong; it will also help minimize the possibility of the NFIP being overloaded with losses.

Still, this needs to be tested in practice—during a large scale disaster—to see if these beliefs hold merit. Some industry minds are concerned by the fact that NFIP claims can be adjusted only by certain adjusters who meet stringent requirements; this is not the case with private flood insurance claims. Inexperienced adjusters may be vulnerable to overlooking, for example, past flood damage.

Whatever kinks there are in the system will have to be worked out, but overall agents welcome the changes. They help remove some of the ambiguity over flood versus wind damage by placing both under the umbrella of one deductible.

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