3 small steps for the U.S. private flood market

by Jen Smoldt on February 14, 2019

one giant leap for private flood insurance

In the past week, we’ve seen some encouraging private flood market activity—that individually may seem small, but as a trend supports our recent post about why 2019 is going to be a big year for private flood insuranceHere are a few small victories from this week that, if you're an insurer, MGA, or broker looking to expand your U.S. private flood market presence, you may want to take note of…

1) Legislation...

In a big win for private flood insurers this week, several regulatory agencies, including The Board of Governors of the Federal Reserve System and the National Credit Union Administration, agreed on a rule that will further the development of the private flood market:

“Specifically, the final rule requires regulated lending institutions to accept policies that meet the statutory definition of ‘private flood insurance’ in the Biggert-Waters Act; and permits regulated lending institutions to exercise their discretion to accept flood insurance policies issued by private insurers and plans providing flood coverage issued by mutual aid societies that do not meet the statutory definition of ‘private flood insurance.’”

This ruling, which goes into effect July 1, essentially provides consumers and businesses with choice beyond the NFIP when shopping and comparing flood insuranceand should foster more private market participation among insurance carriers.  

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2) Consumer awareness...

Heavy rainfall has been causing flooding in parts of Tennessee, and the Tennessee Department of Commerce and Insurance (TDCI) has joined forces with the National Association of Insurance Commissioners (NAIC) to inform consumers about their flood risk. They published an article, more like public service announcement (PSA), in a Williamson-area publication informing readers that “flooding is the most expensive type of natural disaster in the United States” yet “many Tennesseans are not covered by flood insurance.” Bravo for taking education a step further by informing readers to explore private flood insurance policies:

“If flood insurance through the NFIP program is not available in your area, contact your licensed insurance agent to ask about private flood insurance. If you choose a private flood insurance policy, be sure to shop around to compare premiums and coverage.”

3) This guy... 

Chris Green, President of the The Flood Insurance Guru agency, is, in fact, a guru, because he’s educating the public with an industrious, DIY-type PSA of his own:

Mr. Green understands that by informing consumers of their risk, they may just decide to buy a policy from him. Perhaps they don’t know that they live 100 yards from a flood zone. Or, that their NFIP policy only covers them up to $250,000. Insurers have an opportunity to educate and inform prospective clients about their flood risk and the potential limitations of their NFIP policy. In short, Mr. Green has hit on an effective way to do it.

Education is paramount both in personal and commercial lines. When underwriting commercial flood risk, you can use a solution like SpatialKey, along with data that provides multiple views of flood risk (beyond FEMA data alone), as one way to inform and educate your potential clients about their risk, as well as to understand your actual exposure and adjust your risk appetite accordingly.

The floodgates may not be swinging open in private flood insurance yet, but there’s definitely a slow and steady creep happening. If you’re looking to enter the private flood market, you’ve got some time. Opportunity is still abundant. Just make sure you have the right partners at your side, along with the right data and analytics to adequately and accurately select and assess this complex risk.

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Topics: Flood risk, NFIP reform, private flood

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