Tropical storm Gordon lost steam as it moved through the US this weekend, but weather agencies still warned of high inland flooding risks in central states. With hurricane season well underway, the focus is yet again on the struggling National Flood Insurance Program (NFIP) and a persistent gap in flood insurance coverage.
“The NFIP could get a lot more people insured if they would try and cooperate with the private market rather than impede the private market’s growth,” said Craig Poulton, CEO of Poulton Associates and a speaker at the upcoming Flood Risk Summit in Miami. “I don’t think they have to do some of the things that they think they have to, relative to disclosure of losses and relative to their advice to Congress and their advice to lending regulators. Having said that, I think the NFIP has come a long way and I anticipate it will move further away from trying to be a monopoly under David Maurstad as the administrator.”
Poulton added that there’s hope the NFIP will become a partner with the private flood market, which can offer more options for insureds.
“For years, we’ve provided a better policy form that is becoming more well-known. There are three major flavors of flood insurance – the NFIP policy form, the NFIP lookalike policy form, and the industry normalized policy form. Our policy since its inception has been an industry normalized policy,” explained Poulton, highlighting that the policy language in the latter uses standard industry nomenclature and terminology, and has broader coverage than the NFIP.
“Our definition of flood, for example, doesn’t have to involve two structures or two acres of land for it to be a flood. We offer additional living expense and business interruption coverage, we cover contents coverage in basements – the list goes on. And I think we’re just seeing more of that as a response to these events. We’re seeing more private market acceptance, more producers becoming aware of the private market and aware that there are options for their insureds that they need to make available.”
Notably, the private market hasn’t shied away from the flood insurance space despite increasing weather events and if anything, has actually shown a greater resolve to enlarge its presence in the marketplace, Poulton told Insurance Business. The point is to get more people insured and educate them about the risks of floods, especially as the current designated NFIP flood zones only cover about 50% of the land mass that’s at-risk of flooding, leaving many people exposed and unaware of their vulnerabilities, according to the CEO.
“It really is about getting more people to buy flood insurance policies,” said Poulton, listing some of the key lessons that agents and brokers stand to gain from the Flood Risk Summit. “Just because you aren’t in flood zone, that doesn’t mean you aren’t exposed to flooding, and it really should be a coverage that’s offered as a standard procedure to all clients – commercial and personal.”