from PropertyCasualty360.com, March 16,2018
Information to Share With Your Clients Right Now
For many in the insurance industry, the state of the National Flood Insurance Program (NFIP) has long been a cause for concern. While some may dispute the best remedy for the debt-ridden federal program, insurers should note that change is coming.
The NFIP provides critical flood coverage to more than 5.2 million property owners across the country, according to SmarterSafer.org, a national coalition of taxpayer advocates, environmental groups, insurance interests, housing organizations and mitigation advocates.
Twice a year, the NFIP implements program changes. Some changes will become effective on or after April 1, 2018, while others go into effect at the start of 2019.
What will change
Effective Jan. 1, 2019, the following changes, among others, will go into effect:
Preferred Risk Policies (PRPs): Premiums will increase 8%, with a total increase of 6%
- Properties Newly Mapped into the special flood hazard area: Newly mapped policies are initially charged PRP premiums during the first year following the effective data of the map change. Annual increases to these policies result from the use of a “multiplier” that varies by the year of the map change; this multiplier is applied to the base premium before adding the increased cost of compliance (ICC) premium.
- As a result of the increases to the multiplier, premiums for newly mapped policies will increase 15%, with a total increase of 11%.
What won’t change
For policies issued on or after April 1, 2018, there will be no changes to the following:
- Deductible factors
- Federal Policy Fee
- Reserve Fund Assessment
- Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) Surcharge
- Probation Surcharge
The flood insurance market is full of complexities, but it’s up to insurers to understand the market. A complete guide highlighting the changes to the NFIP can be found on Aon National Flood Services’ website.
Changing the conversation
In 2017, extreme weather increased in frequency and caused billions in losses. For example, Hurricane Harvey generated severe inland flooding and “changed the conversation from being a major hurricane to a major flood event,” according to Dr. Holly Widen, severe weather/climate researcher for RMS, during a live Twitter chat hosted by PropertyCasualty360.com and RMS, a catastrophe modeling firm.
Just like Hurricane Harvey changed the flood conversation, communication to potential policyholders needs to change as well. Matt Nielsen, senior director, governmental and regulatory affairs, RMS, tweeted that homes should be evaluated by risk levels rather than if they’re “in” or “out” of a flood zone.
Change will be a major driver that will help the private market for flood insurance grow. Swiss Re tweeted that “improved technology and more state level flood filings” will help the market prepare for floods.
Continue to follow the conversation and stay up to date on what’s happening with flood insurance by following #PC360Flood or #RMSFlood on Twitter.