With the Fate of the NFIP in Question, an Insurance Inspection is More Important than Ever

With the Fate of the NFIP in Question
There has been a lot of buzz lately about the National Flood Insurance Program (NFIP) as we approach the renewal date for the program (September 30, 2017). The NFIP was enacted in 1968 and enables property owners in participating communities that do not qualify for traditional flood insurance to purchase alternative protection to receive disaster assistance in the event of a flood.
The Challenges with the NFIP
Both the House and Senate must pass a bill this September in order for the NFIP to be renewed. The challenge is that the NFIP is already more than $24 billion in debt. Considering this massive amount of debt, the program could be one giant storm away from completely collapsing. Despite the financial challenges, insurance experts do anticipate that the NFIP will be renewed for another 10 years.

Should There Be a Standard Market for Flood Insurance?
As we approach the renewal of this program, some insurance carriers are questioning if there should be a standard market for flood insurance, which would negate the need for the NFIP. Some would argue that there is now enough data available to rate for the peril of flood. There are also several insurance carriers that are already writing flood policies.

However, while insurance companies are slow to innovate, so is the federal government. Coming up with an alternative solutions, such as moving to state residual markets, could help to break exposure down to the state level. Insureds would still need to go through a stringent underwriting and insurance inspection process, and the flood coverage for each property would be written using actuarially verifiable rates.

It will be interesting to see if the renewal of the NFIP goes through. And, if the program is renewed this September, will it further stir the pot on moving to a standard market solution for flood?

Having served as an underwriting partner for property and casualty insurance carriers for more than 35 years, we’ve seen how the insurance industry has evolved over time. We offer a full range of insurance inspection services and field underwriting support to help our insurance carrier partners make informed decisions. As the insurance industry transitions to offering a standard market for flood insurance, you want a knowledgeable and experienced underwriting partner on your side. Please contact us at Insurance Risk Services to learn how we can help you to best determine which risks are worth taking.