The NFIP shutdown is stalling or canceling about 1,300 property sales per day. (Credit: Yurii Kibalnik/Adobe Stock)
The National Flood Insurance Program expired on Sept. 30 after Congress failed to reauthorize it. The government then shut down after failing to pass a budget, leaving the NFIP in limbo for the foreseeable future.
John Dickson, president and CEO of private flood insurance company Aon Edge, spoke with PropertyCasualty360.com about what the lapse means and how private insurance can help.
PropertyCasualty360.com: How does this lapse impact consumers?
Dickson: The biggest impact is for consumers who are looking to maintain a mortgage in areas where flood insurance is required. You can still apply for coverage, but you can’t renew or buy a new policy.
PropertyCasualty360.com: What about current policyholders?
Dickson: You can still get claims paid, and agents are still accepting payments for coverage. With the lapse, the NFIP’s borrowing capacity has shrunk considerably. That’s not really an issue unless we have a major storm event. If that happens, they would have a problem paying claims. Fortunately, we don’t seem to have any storms of that magnitude on the horizon.
PropertyCasualty360.com: Many people will likely be looking to private flood insurers while the NFIP is in lapse. What are the advantages of going that direction?
Dickson: Federal flood insurance has contracted over the last several years, and private insurance has not only made up those numbers but increased them. Today, more homes are insured against flood risks than ever before.
The biggest advantage when you’re thinking about the private marketplace is that it’s a thriving and functioning marketplace, with options and configurations that consumers might not otherwise have. You can get up to $7 million in coverage with private insurance, versus a $250,000 policy through the NFIP. You can cover things like living expenses if you’re displaced from your property for a period of time. You can cover outlying buildings and swimming pools if you need too. There are ever-growing choices in the private market.
PropertyCasualty360.com: Is the private market less affordable than the NFIP?
Dickson: I just got off the phone with a customer who had a quote for an NFIP policy in hand, but because of the lapse, they’re not able to act on it. We looked at private options and were able to save that customer over $4,000.
We tell customers constantly, if you’re talking to your insurance professional and they can only talk about one option for flood insurance and it’s the NFIP, you should think about getting a different insurance professional. Private options are prevalent, comprehensive and they’re tested and proven. We have the vehicles today to save people a lot of money and experience protection like never before.
PropertyCasualty360.com: Given the deep political divides we’re seeing right now, do you think lapses in the NFIP will become more common going forward?
Dickson: Are you asking if this is the new normal? I’d like to think not. I’m an optimist, and the federal program does wonderful things for millions of people. I don’t think the disruption we’re experiencing now is good for anybody, and hopefully this is short-lived.
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