AIG Introduces Excess Flood
AIG Private Client Group, a division of the property and casualty subsidiaries of American International Group Inc., announced the introduction of excess flood coverage for insureds' dwellings and contents in the event of loss by flood.
According to the Federal Emergency Management Agency, floods are the most common natural disaster in the United States, AIG noted in its product announcement.
Ross Buchmueller, president of AIG Private Client Group, told National Underwriter that insureds who access the program are still covered by the National Flood Insurance Program, "but instead of having $250,000 coverage on a $450,000 home, homeowners can now insure the entire amount." The program, he added, provides "virtually whatever limits somebody wants. The highest limit written so far is $70 million."
The NFIP spends hundreds of millions of dollars per year paying out claims which cap out at $250,000 for dwelling coverage and $100,000 for personal contents, he said. AIG's program is to be used in excess of FEMA coverage and insures contents on an actual cash value basis.
Since AIG's program is more about a difference in limits, conditions are the same as those offered under FEMA, he said.
He said lenders have not required more extensive coverage for damage from floods because they have "not been able to find enough capacity to force people to properly cover it."
Mr. Buchmueller explained that insurance traditionally is driven because it is mandated. Car insurance, for instance, is purchased "because you have to in order to drive. And you buy homeowners insurance because you have to in order to get a mortgage."
He explained that "if you went to a lender to buy a house in the Hamptons" on the eastern end of Long Island, N.Y., "but said you were only going to buy $250,000 of cover for fire, they would not loan you money." However, the lender would take $250,000 for flood insurance because there hasn't been a market for more.
The excess flood program is aimed at homes with a replacement cost of more than $1 million, according to New York-based AIG.
The program currently is available in Arizona, California, Florida, Georgia, Hawaii, Maine, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington, D.C., with more states to be added in the future, the company said.
When combined with a homeowners policy from an AIG member company, the coverage can also be used to help resolve claims-handling conflicts. For example, the company said, after a major storm such as the recent Hurricane Claudette, there may be confusion as to whether damage to a home is caused by wind, which is covered by homeowners insurance, or by flooding.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 1, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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