Flood Coverage Not All Wet

reasons why these two agencies have been named NFIP agencies of the year. Stype said his agency mails brochures produced by NFIP and Fidelity (Neefus-Stype's flood insurer) to clients who have purchased homeowners policies. To protect against E&O, the agency requires clients to sign a flood insurance rejection letter if coverage is declined. The agency also adds stickers to homeowners policies alerting insureds that floods aren't covered under homeowner's insurance. Since launching these initiatives in 2006, Neefus-Stype has seen flood insurance policies grow from 5 percent to 15 to 20 percent each year, Stype said. And when flood insurance accounts for 2 to 3 percent of $25 million in total premium volume, that is a sizeable increase.
Williams Insurance Agency has adopted similar initiatives and seen comparable results. The agency recently launched a mailing to current clients featuring information about hurricanes, local storms and NFIP facts. Over a 4-month period, the agency wrote more than 300 new policies, compared with only 10 to 20 policies without the marketing efforts, Clark said.
Clark also said that the agency provides local real estate agents information on flood insurance and different flood zones.
If H.R. 3121 passes Congress in its current form, both agencies may see growth because of the bill's provision allowing increased coverage limits (see the November AA&B's “Legislative Roundup”). Clark said many of his clients have second homes, which would have flood insurance coverage under H.R. 3121. Another advantage is that H.R. 3121 remaps floodplains to ensure proper zoning for property locations. The bill could also include business interruption insurance and optional replacement cost on contents and options for coverage for a finished basement.
Trends and the Future
Stype predicts that the legislation will be the main issue for 2009. “If it's not renewed, claims don't get paid,” he said.
Clark sees different challenges ahead for the year. “I would like to see local municipalities take a greater role in determining where it is safe to build structures,” he said. “People shouldn't be building homes in coastal barrier resource areas. If the county can get tax money, they let it happen. I am beginning to see a trend where counties and municipalities are taking a stronger stance [determining where it is safe to build structures].”
And while he predicts that state and national legislators will continue to focus on floods and other catastrophes, the current economic situation has made many insureds reluctant to spend more money on insurance, Stype said.
“If they don't need it, they don't want to purchase it,” he said. “We see a trend of many clients not purchasing all of the insurance they really should get to take care of their larger losses. But with the catastrophes that hit our nation, our insureds are starting to see the cause and effect a flood could have in our area.”
Clark and Stype agreed on the importance of consumer education about the need for flood insurance and exactly what it covers. Under current flood insurance policies, basement coverage is bare bones; while the basement structure is covered, contents of a finished basement are not. Trees, septic tanks, and swimming pools are also excluded under a flood insurance policy. Insureds should know their flood zones and elevations. It's important to clarify that floods are a nationwide problem. An insured can check his risk for floods at www.fema.gov at the FEMA Map Service Center.
“Almost everybody has an exposure to floods,” Stype said. “You can't base purchasing coverage on what has or hasn't happened in that property over the past 40 years.”

NFIP Extension
Years ago, flood insurance was too costly for private insurers to offer. If you were a flood victim, your only recourse was disaster relief. The National Flood Insurance Program (NFIP), established in 1968, changed all that by providing property owners the opportunity to purchase insurance protection for flood losses, with coverage provided by a pool of participating private insurers. Community participation in NFIP is voluntary, and currently more than 20,000 communities are onboard. Flood mitigation is part of the program through the development of building standards. Buildings constructed in compliance with NFIP standards sustain 80 percent less damage annually than those not built in compliance, NFIP states.

The program has been in the headlines because of its need for Congressional reauthorization. In June 2004, President George Bush signed the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004, reauthorizing NFIP through September 2008. That month, a 7-month extension (H.R. 6965) was passed to reauthorize NFIP through April 30, 2009.
Among other initiatives, H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, looks to extend NFIP to 2013. The bill passed the full house in September 2007 and a different version passed the Senate in May 2008. The two chambers have yet to resolve their differences and have the bill be signed into law by the president. The bill would reauthorize NFIP for another 5 years and ban insurers who offer NFIP policies from excluding wind coverage if wind and flood destroy a home at the same time.