The Uphill Battle Of Private Flood Insurance

The Uphill Battle Of Private Flood Insurance
As the National Flood Insurance Program (NFIP) plunges ever deeper into debt even with the hope of reforms or bailouts on the horizon, the stagnation of the private flood insurance market remains somewhat of a mystery. The wide availability and usage of the NFIP brings with it a sense of trust, history, and competency that private flood insurance companies can hardly compete with. Still, the lower prices and more comprehensive protections offered by many alternative flood insurance providers should be alluring enough with the number of insureds worried about high prices and the history of premium hikes.
Restrictions And Roadblocks
Lender restriction is one of the biggest threats to purchasing private flood insurance. Many mortgage companies will simply not accept private flood insurance coverage, leaving the NFIP as the only available option. Another roadblock to the usage of the PFI market is failing to appeal to business owners at a time when only 5% of all NFIP policies are commercial. Private flood insurance companies frequently state to business owners that the cover just as much as the NFIP, when commercial property insureds desire more than the barebones system. Instead of utilizing a commercial inspection to customize a plan to an insured’s needs, the PFI market insists on the same cookie-cutter insurance options. Business interruption and other advanced coverage options would likely make these policies more attractive and palatable if offered.

Untested In Disaster
While the NFIP is no stranger to reports of screwing homeowners over when disaster truly strikes, the risk of a PFI carrier doing the same is a much higher risk in the minds of many. A federally funded program has ever advantage in reliability, even if the wait time is excessive and the payment less than expected. A private flood insurance carrier faced with widespread disaster level claims typically does not have the same backing and funding available to ensure all claims will be paid in full and in a timely manner. At a time when many people are expecting more natural disasters to occur due to climate change, it is no surprise that home and business owners prefer to bank on the NFIP.

The Future Of Private Flood Insurance
The benefits PFI offers are numerous, and it could eventually grow into a sizeable competitor should NFIP reform bills continue to drag along while the situation grows worse. With millennials purchasing more flood insurance than previous generations, the opportunity is definitely there. The higher levels of basic and possession coverage are enticing to the average home or business owner. Add in perks not found in the NFIP such as some coverage of living expenses while the home is uninhabitable and it once again becomes hard to see why more people don’t flock to PFI despite the cons. All of these additional features increase premiums, which can lead to furthering the unattractiveness of private policies. With more of the perks and attractive additional services, PFI companies will need to dedicate more resources to keep fraudulent claims and risks low to succeed. Residential and commercial inspections will be more important than ever in maintaining and confirming status as well as customizing coverage protections.

Insurance Risk Services has provided insurance carriers with accurate and reliable underwriting support and inspection services for over 35 years. Even as the insurance industry changes over time, you can always count on the IRS team to deliver residential and commercial inspection services in line with your business needs. Contact us today to see what we can do for you.