NY/NJ flood map dispute leave brokers in difficult situation

When should a producer discuss impending FEMA changes that could potentially impact hundreds of insurance policies?

Insurance News

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By Josh Chetwynd

Brokers and agents in New York and New Jersey better be ready: a battle is brewing over flood maps that will likely impact scores of clients.

Following Hurricane Sandy and other devastating East Coast storms over the past decade, the Federal Emergency Management Agency is in the midst of redefining flood zones for more than 200 municipalities in New York and New Jersey. In about 190 of those areas, locals have filed comments and appeals to fight the plans.

At stake could be huge individual changes in flood insurance requirements.

“This is an issue we are certainly aware of,” said Tim Dodge, the assistant vice president for research at the Independent Insurance Agents & Brokers of New York. “A given agent could be forced to hit a client who has lived in their home for 30 years, who under the old map was in a moderate- to low-flood area. Now, they’re in a special hazard area, and if you’re in that area and you have a mortgage, your lender is going to require you to buy special insurance. Agents are going to have angry customers.”

With this in mind, many want to make sure that FEMA is getting it right. Some organizations, like New York City’s Office of Recovery and Resiliency, have questioned whether the federal agency’s preliminary mapping changes for the 100-year floodplains in a place like Battery Park are accurate. In that instance, the city has a more conservative estimate of floodplain growth.

Whether appeals from communities will sway FEMA is unclear, but Dodge recommends that, while agents should be aware of the battles, they will probably be better served by holding off on pre-emptively warning clients of the potential dangers. 

“While you know that there are going to be changes, it doesn’t make sense to worry a client when the flood maps aren’t finalized,” Dodge said. “Otherwise, you’ll probably just be having the same conversation again three years from now.”

Regardless, one thing is for certain: shifts in the climate suggest that there will be continued growth in this business.

“I think it is fair to say that the flood market is going to keep growing,” Dodge said. “There has been encouragement for private insurers to get into the flood market and, maybe, those who didn’t think of [getting into] flood insurance before are starting to think that’s something I should think about. I expect the volume of flood insurance to increase in the foreseeable future.”
 

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