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Private Flood Insurance Gets Boost

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Insurance legislators consider model law to expand choice

Credit: philhol

Beginning today, mortgage lenders are required to accept private flood insurance coverage as an acceptable substitute to National Flood Insurance Program (NFIP) coverage.  The NFIP is back in the news with a dubious new record: the average claim paid in 2017 surpassed $100,000.  It’s why private flood is catching on and why a national group of insurance legislators will be meeting next week to consider model legislation to ease the way.

The new federal law implements the Biggert-Waters Act requirement that regulated lending institutions accept private flood insurance policies that satisfy criteria specified in the Act.  Carriers provide written verification that their policies do so.  You can read the federal order here.

Despite the lender acceptance rule becoming effective, there is still reticence among the banking communities because of their uncertainty of private flood coverage.  This is the exact reason Lisa Miller & Associates is pushing a model bill before the National Council of Insurance Legislators (NCOIL).  The three page bill has five components: prior form approval; unregulated rates; mandatory agent education of their customers; insurance commissioner notification if a company wants to enter a state’s flood market; and insurance commissioner certification of the policy form that it meets or exceeds NFIP coverage.  This just makes sense to ease the way for a vibrant private market in all 50 states.

Lisa Miller testifying on model flood insurance legislation at the NCOIL Spring Meeting in Nashville, TN, March 15, 2019

On July 11 in Newport Beach, California, NCOIL’s newly formed Special Committee on Natural Disaster Recovery will conduct a discussion of the model bill, with proponents saying it will go a long way in eliminating disputes and misunderstandings among regulators and stakeholders, and others saying all that is needed is a resolution.  LMA is an active supporter of the model bill, based on Florida’s successful laws, along with others who will be in attendance in California.

The need for a private flood market as an alternative and complement to the financially challenged NFIP has never been greater.  A recent E&E News analysis of NFIP 2017 claims data, shows the average claims payout was $110,815, a record for the 40 year-old federal program.   Of the $69.4 billion paid out since 1972, policyholders in Texas and Louisiana collected 51%, driven in part by the number of repetitive loss properties.  Adding in Florida, New Jersey, and New York brings the payout to 76% or $52.2 billion of the NFIP’s total payouts.

Clearly, this is unsustainable without additional massive taxpayer funded bailouts of the NFIP.  A Milliman report found that a majority of single-family homes in Texas, Louisiana, and Florida could see cheaper premiums with private insurance over NFIP.  In Florida, NFIP’s largest customer, 77% of homes could see cheaper rates.

LMA Newsletter of 7/1/19

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Tags: Milliman, Model Flood Law, National Council of Insurance Legislators, NCOIL, NFIP Claims, Private flood insurance

“Your newsletter is fabulous!  I greatly appreciate the topics you expose, so that insurance professionals like myself can keep up with the latest events that affect the public we serve and ourselves.”

Cynthia Hoehn, Independent Property & Casualty Personal Lines insurance agent
Clermont, FL

“I have followed your weekly newsletter and podcasts and now have a full appreciation for what you bring to this industry.  You are an inspiring force, plain and simple.  I wanted you to know that you make a difference.  Thank you for all you do!”

Jeffrey Karam, CPCU
Bradenton, FL

“Another great Newsletter on Florida industry this week.  Your service and advocacy in Florida is very important to keeping me updated and apprised of the Florida insurance laws, trends and overall environment.  Something similar is very much needed in Louisiana, too.”

Jennifer Tedesco, Esq., Claims Director
Pharos Claims Services
Orlando, FL

“Thank you Lisa for staying on top of, as well as advocating, for Florida residents and legislative reform. Your newsletters are very informative and enjoy reading the points of view.”  

Shawna Miller, Sr. Claims Quality Assurance & Compliance Manager
Florida Peninsula Insurance Company
Jacksonville, FL

“Just wanted to say that I thoroughly love your newsletter. It’s is always informative and insightful to the ins and outs of our industry.  You are an inspiration and an important asset in the insurance world.  Keep up the great work!” 

Cynthia Scott, President
University Insurance Group
Davie, FL

“Lisa this is another great newsletter, and we appreciate the time and energy you put into these informative updates – you are on top of these topics!”

Mike Graham, CEO
Smart Vent Products, Floodproofing.com, & Risk Reduction Plus
Juno Beach, FL

“Lisa Miller is a true champion for the insurance industry, with her regular updates! We appreciate all you do and keeping us up to date on priority issues!”

Gillian Lloyd, Account Executive
Zywave
Milwaukee, WI

“Great article on Risk Rating 2.0!”

Austin Perez, Senior Policy Representative for Federal Housing, Valuation, Insurance and Commercial Issues
National Association of Realtors
Washington, D.C.

“Just a quick note to let you know how much I have appreciated your newsletter over the years and the assistance they offer for those in the field of claims. We depend on the information more than you will ever know!”

Laurie Rasberry, Chief Claims Officer
Acorn Claims
Prosper, Texas

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