Second-worst flooding in area history meets many uninsured

It’s unsurprising given take-up rates for flood across the country, but at least one producer thinks this flood – which has seen thousands evacuated – will “have a happy ending”

Second-worst flooding in area history meets many uninsured

Insurance News


Thousands have evacuated and more than 400 National Guard soldiers have been deployed as serious flooding in Iowa continues to damage homes and business property.

Temporary barriers in Cedar Rapids, the state’s second-largest city, stemmed much of the flow as the Cedar River crested just above 22 feet – but the deluge still threatens to bring the second-worst flooding event in state history.

“It’s not over yet,” Cedar Rapids City Manger Jeff Pomeranz said late Tuesday morning.

Along with Cedar Rapids, the towns of Clarksville and Vinton have also suffered from overflowing rivers in the heavy rains.

Yet while emergency services, state police and public officials are busy responding to the disaster, insurance agents, carriers and claims services associated with the National Flood Insurance Program are unlikely to be as busy.

According to NFIP data obtained by Insurance Business America, just 1.2% of home and business owners in Cedar Rapids have an in-force flood insurance policy. Figures for Clarksville and Vinton are equally grim, with just 12 and 70 in-force policies in each city, respectively.

This is despite the historic 2008 floods in the state, which caused at least $64 billion in property damage.

Ed Faber, founder of independent agency Insurance Gurus in Cedar Rapids, is unsurprised by the lack of coverage.

“Everyone believed we’d never see anything like [the 2008 floods] again,” Faber told Insurance Business America. “I got a few panicked calls on Thursday night and was able in one case to add backup water on a client’s rental property, but I haven’t heard from anyone since.”

Faber did say he expected less property damage during this flood as compared to the 2008 event, in part because of the lower crest, but also because of the city’s advanced preparation.

“We know what a bad flood looks like now, and I’ve seen several vehicles loaded with appliances, furnaces and water heaters being moved to safer areas,” he said. “Before, people were literally just packing a bag of clothes and leaving because the evacuation order came so quickly.”

The number of government-sponsored flood policies in force has plunged nationwide by nearly 10% in the past six years, from 570,000,000 in 2009 to just 5,151,000 in 2015. It’s a large fall, mostly in response to a lack of major flood events and price increases for coverage.

In Iowa, for example, Faber says newly issued policies are written at close to three times the preferred rate of grandfathered properties.

But he does see some hope for improvement.

“I think most people will reconsider flood because it’s real now,” Faber said. “Especially since they’ve been through it twice now, I think they’ll bite the bullet. After investing so much in rebuilding after 2008, I don’t think they’ll want to see [those losses] happen again.”

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