Is The NFIP Keeping Up With Current Market Needs?
The NFIP was created in 1968 by the U.S. federal government in an effort to provide standard flood insurance for a risk considered to catastrophic for the private market.
"Coming up on its gold anniversary, the program has served its purpose of protecting American homeowners and business owners, stabilizing real estate markets, categorizing flood risk within the floodplains and promoting responsible land management," said Keith Brown, CEO of Aon National Flood Services, a third-party NFIP administrator on behalf of insurance companies participating in the Write Your Own flood program.
Over recent years, many of these achievements have come under pressure, including: flood maps, rates, and the $23 billion debt owed to the U.S. Treasury. Is the NFIP suffering from an identity crisis? Is it too constrained by legislation to achieve its objectives? One just needs to reference the Biggest-Waters Flood Insurance Reform Act of 2012 and Homeowner Flood Insurance Affordability Act of 2014 to understand the challenges.
There has been considerable discussion at the legislative level about the inadequacy of rates, especially the subsidization of the highest risk properties, and the product offerings available with the NFIP.
"The homeowner is aware of the coverage is present in their flood policy," said Terry Black, vice president of claims at Aon National Flood Services. "One of the hardest conversations with a homeowner right after a devastating flood is the one explaining there is no provisions for additional living expenses."
Please let us now your thoughts:
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