Davidson Realty, Inc.

Flood Insurance – A Changing Landscape

August 22, 2018

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Posted by in News

The National Flood Insurance Program operated by FEMA, currently owes

the U.S. Treasury over $25B and the debt is growing. Here in Northeast

Florida we are seeing the threat of flood increase from the density of

population near the shore, a rising river and storms moving closer to us.

The NFIP continues to receive legislative extensions with rates and

surcharges routinely tacked on. Sooner or later we can expect this program

to hit the wall and incur a major renovation in order to survive. Fortunately,

private insurance carriers have taken notice of these events and they are

beginning to take action.

 

 

Let’s not lose sight of the fact that property insurance is a for-profit industry. Private insurers will not invest if product

creation unless there is an actuarial certainty that they will make money.

That’s fine. If they can make money and at the same time, consumers can

save money & secure reasonable coverage, a win-win is an acceptable

outcome. So what is taking place? In the last couple of years, private

insurers are testing their own flood insurance, backed up by the Lloyd’s of

London syndicate, which often is less expensive and provides better

coverage that NFIP. This product will even offer coverage in a standard

hazard flood zone (required flood insurance) without the need for a flood

elevation certificate! These private carriers have created their own

“proprietary algorithms” that allow them to determine a structure’s

elevation versus the assigned base flood elevation. The carrier’s system can

then “qualify” a structure automatically. Keep in mind, this is all new so

changes and improvements will be routine. Considering the NFIP has been

at it for 50 years, we’ll need to have some patience to see if private

industry can work this out to be a viable, long-term alternative to NFIP. At

this point. we have nothing to lose. These products are available through

most independent insurance agents. Give it a try. You may receive a

pleasant surprise!

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