For most agents, writing a Homeowners' policy is as easy asriding a bike. They've done it hundreds, if not thousands of times,they understand the coverage, they have no trouble presenting it totheir clients and they could complete the application in theirsleep.

Writing Flood insurance is a different matter, more like ridinga bike with a flat tire.

The National Flood Insurance Program (NFIP) requiresmore-detailed underwriting information than a standard Homeowner'sapplication. Understanding the NFIP guidelines, its flood maps,elevation certificates, coverage limitations and constantlegislative changes can make for a bumpy ride.

Agents generally write Flood insurance in conjunction with aHomeowner's policy when the property is in a designated SpecialFlood Hazard Area and the mortgage company requires coverage. Ofthe 90 million residential structures in the United States,approximately 10% are located in Special Flood Hazard Areas, yetonly about half of those structures carry floodinsurance.

“Because Flood insurance is written less frequently thanHomeowners' insurance and the coverage is quite different, someagents are not comfortable offering coverage,” said Keith T. Brown,CEO of Kalispell, Mont.-based Aon National Flood Services. “Whichcould be why after an event like Katrina or Sandy, you'll oftenread that only a fraction of the affected property owners carriedFlood insurance.”

Of the $3 billion in damages after flooding in Texas andOklahoma that took 32 lives in May of 2015, approximately one-thirdwas covered by flood insurance. Also last year, torrentialrains resulted in a flash flooding in Colorado, causing $2 billionin damage, with less than 2% of losses insured.

Related: Flood insurance policy puts Missouri agent in hotwater

“Agents probably explain to their Homeowners' clients that flooddamage is excluded from the policy,” said Brown. “Why aren't theyoffering Flood insurance? As part of the industry intent onprotecting the public from catastrophic financial losses, theyshould.”

Premiums in preferred zones are affordable and flash floodingcan occur almost anywhere in the U.S. Property owners withhomes in low to moderate risk areas account for 20% of the NFIP'sflood losses.

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National Flood Insurance Program policies don't coverpersonal contents in a basement. (Photo: iStock)

Comparing Homeowners and Flood insurance

As most Americans have a reasonable understanding of how theirHomeowners' policy works, they often expect the same coverage ontheir Flood policy.

At minimum, agents should inform property owners that the NFIPFlood insurance does not include coverage for finished basementsand additional living expenses. While the NFIP policy does notcover personal contents in a basement, it does provide valuablecoverage for “footings, foundations, posts, pilings, piers or otherfoundation walls and anchorage systems required to support abuilding; stairways/staircases; furnace, hot water heaters,electrical junction, circuit breaker boxes electrical outlets andswitches, etc.”

There are other differences between a typical Homeowners'insurance policy and NFIP Flood insurance as well. The chart belowillustrates a few of the variations between the two policyforms:

(Click on chart for larger view)

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Are you offering Flood when writing a Homeowners' policy?(Photo: iStock)

FEMA regulations

With a $24 billion budget deficit on the flood program, FEMA isaware that it needs assistance. Recent legislation has pavedthe way for private industry to dip its toe into the Floodinsurance marketplace.

A number of early entrants to the private market offered nothingmore than the NFIP policy repackaged and discounted, nonetheless,they are industry pioneers that have helped pave the way. Newtechnology and risk modeling tools are enabling the privateinsurance sector to create new primary flood insurance contractsthat offer access to higher limits and simplified underwriting andapplication processes.

What can agents do to stem the rising tide of floodlosses?

“By offering Flood coverage at the point of the Homeowner sale,in addition to offering protection to your clients from devastatinglosses, you're also helping to protect yourself from potentialerrors and omissions claims,” said Brown of Aon National FloodServices.

Paula M. Keith, a client relations director Aon National FloodServices, agrees. “A large percentage of Errors and Omissionsclaims can arise from failure to offer Flood coverage. Whether it'snot offering uninsured motorist coverage (Auto), replacement coston contents (Homeowners) or not offering Flood insurance, itsfailure to offer coverage.”

Other resources agents may wish to consult:

• FloodTools.com, offering flood maps, loss calculators,claimant videos and educational materials to educate agents andconsumers on their flood exposures.
• FloodSmart.gov is another helpful resource that offersinsights on the risk of flood and answers basic floodquestions
• Flood insurance courses when they're in need of continuingeducation credits
• View the NFIP Standard Flood Insurance Policy.

Offering Flood insurance to prospective and current clients willhelp agents expand their business and provide a layer of protectionfor catastrophic loss for their clients. It's a procedurethat every agency owner/manager should have in place. Providingcontinual flood education to their staff is key to insurance agentsbecoming comfortable with, and offering Flood insurance to theirclients.

Julie Duncan is a client relations director at Kalispell,Mont.-based Aon National Flood Services. Contact her at [email protected].

Related: Flood insurance on the cusp of tremendouschange

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