Floods are a hot topic at the moment with the US is facing billions of dollars in fresh flood-related claims following the catastrophic impact of Hurricanes Harvey and Irma.
The National Flood Insurance Program (NFIP), which was already $25 billion in debt before the latest hurricanes struck, is likely to spiral further into the financial mire when the total losses come in from the recent storms.
Many are quick to criticize the Federal Emergency Management Agency (FEMA) and blame its ‘outdated’ flood maps for the considerable coverage gap in flood insurance. However, there are others who have faith in the NFIP and are encouraged by its operation in catastrophe-free years. Brian Samberg, president of Southeast Insurance, told
Insurance Business that a bit more inclusivity and reform could help the government program thrive.
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“The more involved people get with the NFIP, the better it’s going to be,” he said. “Consumers need to be educated about flood insurance. Some states in the middle of the country think they’re immune to flood but they’re not. There are rivers, lakes and other perils that people need to be aware of.
“There are ways the NFIP can be improved. I think flood zone re-mapping is important and that more areas should be included in mandatory flood coverage zones. The threshold needs to be lower to include more borderline places in mandatory flood zones.”
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He added: “NFIP rates are on a glide path – they’re not actuarily sound. The rates are below where they need to be and that’s because Congress doesn’t want to hit consumers with more expensive premiums.”
NFIP rates are being challenged by the rise of the private flood insurance market, which is “a very good thing,” according to Samberg. Private insurers are starting to bring more competition to the market and are therefore offering more diverse coverage options for clients, which is likely to help with pricing moving forward, he said.
It is not yet clear how the flood insurance market will be affected by losses caused by Harvey and Irma. Insurance rates are not the top priority at a time of catastrophe, Samberg commented.
“[At times like this], the only thing the insurance industry can do is try to appease and help clients as quickly as possible,” he said. “When you have hundreds of thousands of people adversely affected by an event, there’s only X amount of insurance manpower to assist. Everybody needs to work together to start the recovery process quickly and efficiently.”
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