NFIP raising rates up to 25%
There are three states whose legislatures are teeing-up bills to provide the needed structure and encouragement for development of a private flood insurance market. The idea is to help consumers, whether residential or commercial property owners, gain affordable flood insurance as an alternative or complement to the National Flood Insurance Program (NFIP).
Alabama, Iowa, and Massachusetts – no strangers to catastrophic riverine and/or coastal flooding over the past decade – have bills in play in their current legislative sessions to facilitate a private flood insurance marketplace. (You can click on the state to read each bill.) And the insurance is not just needed for so called “high-risk” properties. In Alabama, for example, regulators there tell us that more than 20% of NFIP claims come from outside high-risk flood areas. “Clearly, those who live in areas with low-to-moderate flooding risks need to understand flood insurance and have affordable options available,” according to the Alabama Department of Insurance.
As we’ve said for the past five years now, the market for private flood insurance is growing in the U.S., thanks in part to Florida’s model laws. Those laws were the basis for the Private Primary Residential Flood Insurance Model Act approved last fall by the National Council of Insurance Legislators (NCOIL). The Act provides a streamlined way for more states to create a vibrant private flood market, just as Florida has (with 37 companies and growing) and now South Carolina, too. We are continuing our work in other states to use the NCOIL model as a framework and foundation for meaningful private flood insurance legislation. As we say, “if you build it, they will come.”
Meanwhile, the NFIP has released its April 2021 rate increases. Pre-FIRM and non-residential business properties in the high-risk Special Flood Hazard Areas (SFHA) with annual 1 in 100 year flood risks will see rates increase 23.5% to 25%. NFIP properties in non-SFHA zones will see increases of 1.3% to 1.4%. An analysis shows premiums will increase from an estimated average of $880 per NFIP policy to $969, resulting in an average increase of 10.2% (HFIAA surcharge and Federal Policy Fee not included). When that surcharge and fee are included, the total amount billed to the policyholder will increase from $990 to $1,080, an average 9% increase. Private flood rates, with their granular property-specific modeling, are proving very competitive with the NFIP, in addition to offering coverages exceeding NFIP policies.
LMA Newsletter of 2-22-21