The National Flood Insurance Program (NFIP) will likely be inundated in the coming days, weeks and months. Already hugely in debt and soon up for reauthorization, the federal insurance program could well change in the near future with private options poised to jump into the fray.
Craig Poulton, chief executive of Poulton Associates in Salt Lake City, Utah – which boasts the country’s largest private flood insurance program, dubbed the Natural Catastrophe Insurance Program (NCIP) – spelled out his company’s private flood offerings to
Insurance Business. He believes they’re working much more efficiently than the NFIP.
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“The NCIP has been offering primary flood insurance to replace NFIP policies for more than 16 years,” Poulton said. “We are the largest non-NFIP primary flood insurance facility in the United States and we were the first significant competitor to the NFIP.”
The company writes a new policy about every two minutes, Poulton said.
“Insurance professionals often express their frustration with the complexity of placing coverage through the NFIP. We understood early on that we needed to simplify the flood insurance purchasing process for insurance professionals. We saw that we needed a primary flood insurance policy form that did not require insurance professionals to learn an entirely new language to understand it. So, we created [a platform that can] be easily used by anyone who is even somewhat familiar with property and casualty insurance. And, we created a policy form that is broader than the NFIP form and that complies with insurance industry norms.”
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Prior to hurricanes Harvey and Irma, the NFIP was $25 billion in the red. And that is expected to get worse. “It is very possible that within a few months the NFIP will owe America’s taxpayers more than $60 billion,” Poulton said.
The main differences between the NFIP and NCIP, according to Poulton, are speed of claims action, superior rating, and better and simpler coverage.
“Within days after a flood loss, our insureds are receiving payments for their additional living expenses while many of those insured by the NFIP were still looking for public shelters. It is extraordinarily satisfying to be helping people with significantly better coverage and consistently better pricing than what is available through the NFIP monopoly,” he said.
“The NFIP is using outdated technologies and flawed rating mechanisms that rarely result in a high correlation of risk with rate. It is this fact that originally opened the door for us to compete. We assess risk in a far more granular and holistic way than the NFIP does.”
Reauthorization of the NFIP has been pushed back by the government in light of the recent hurricanes (it was supposed to have happened this month). But Poulton still believes private is the way to go.
“The NFIP has been a government maintained monopoly for over 45 years offering an inferior product and inaccurate pricing, while costing taxpayers billions,” he said.
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