As National Flood Insurance Program (NFIP) premium rates have surged toward the stratosphere, homeowners have been looking for another way. And in a growing number of markets, private companies are offering them one. The situation is making news — and now, news media are starting to take a closer look at the non-governmental insurance choices.
The Connecticut Post published this story in February, after the Florida-based Flood Insurance Agency took its offering to Connecticut in early 2014 (see: "Mixed views on private flood insurance," by John Burgeson). Asked the Post: "Is a policy from a private Florida coastal flood insurance company too good to be true, or does it offer some homeowners their only hope at getting affordable coverage?"
Evan Hecht, CEO of the Flood Insurance Agency, told the paper that he got a phone call from Mississippi state insurance commissioner Mike Chaney, expressing support and asking what Chaney could do to help. And in response to critics' observation that his policies are not federally-backed, Hecht responded that his policies are backed by the prestigious international insurance firm Lloyd's of London. "Lloyd's has been writing policies for 368 years," said Hecht. "They have never not paid a valid claim."
One Connecticut insurance broker pointed out that private insurers, unlike the NFIP, could cancel a policy if a homeowner made a claim. And another accused private insurance providers of taking "only the cream" of the NFIP's market, by accepting only low-risk applicants. But Hecht responded: "Look, if you had a $200,000 loss from Sandy, and that was your only loss in the last five years, I would write you a policy. Does that sound like I'm cherry-picking?"
In Florida, meanwhile, state legislators are continuing to work on a bill that would authorize an expansion of the private flood insurance market in the state. But differences in the House and Senate versions of the legislation mean that there's still some haggling ahead, according to the Sarasota Herald-Tribune (see: "Flood insurance bill moves in state Senate," by Lloyd Dunkelberger).
Legislation authored by St. Petersburg Senator Jeff Brandes would allow insurers to offer a scaled-back coverage option that would let homeowners insure their properties for just the amount of the home's mortgage. But a House version would require companies to offer coverage at least equivalent to the federally-backed NFIP policy — and would also allow homeowners options for increased coverage, including a broader definition of a flood event and more coverage of personal property.
There's less urgency to the Florida legislature's work, now that Congress has passed an NFIP measure that will delay many of the sharp hikes in NFIP premium rates that have shocked the real estate market in recent months. But Florida state Senator Brandes says the state still needs to act. Said Brandes: "Congress has kicked the problem down the road. Ultimately these rate increases are going to catch up and we're going to be right back in the same situation."