Patrick, you are spot on! Flood IS insurable but only if done properly. Here’s the rub: I put out a $5M limit for flood in a zone A with a $50,000 ded (only $250K exposure!) only to have the agent recommend to the insured they purchase the NFIP policy for $415 for and a $1,000 deductible. How is the market supposed to compete with that?!
Secondly, we cannot collude on pricing as Craig Andrews seems to suggest and the reality of today’s market means that some desparate underwriter or company will start giving super cheap or “free” flood coverage to get an edge in the market which the rest of the market follows to compete. Thanks to competition we are no longer funding for the “Big One”.
My suggestion? The Government sets a minimum rate (of which a small portion goes to the NFIP pool) for all policies to get around collusion issues and then offers a backstop like they do for TRIA where only the worst floods would they step in to stop the bleeding of insurers. Those in low hazard zones will still pay the minimums and those in high hazard zones will pay more but now we have enough income for Flood to fund the next disaster.
Thanks for your comment. It sure does make it hard to compete when you have a scenario like you mentioned.
I don’t think that Craig was suggesting collusion (interesting thought since I was just studying US v. SEUA). Rather than collusion, I actually recommend keeping abreast of other companies’ filings. Many states allow open viewing of many filing documents. As Craig mentioned, using ISO filed loss costs when you can, too.
As to government setting minimum rates, I’d rather see the states handle it. Let’s take the NFIP out of the equation altogether. The less that the Feds are involved in the business of insurance, the better off the consumers are. At least that’s my opinion.
I did not intend to imply insurers should “collude” on pricing (or with the Russians!). The flood cause of loss premiums should be determined by ISO and other rating bureaus in the same manner as they currently do for all other covered causes of loss. Individual insurers should be able to amend premiums at their discretion based on their corporate underwriting and pricing philosophy, just as they currently do for fire, wind, theft, vandalism and all other covered causes of loss.
Patrick, you are spot on! Flood IS insurable but only if done properly. Here’s the rub: I put out a $5M limit for flood in a zone A with a $50,000 ded (only $250K exposure!) only to have the agent recommend to the insured they purchase the NFIP policy for $415 for and a $1,000 deductible. How is the market supposed to compete with that?!
Secondly, we cannot collude on pricing as Craig Andrews seems to suggest and the reality of today’s market means that some desparate underwriter or company will start giving super cheap or “free” flood coverage to get an edge in the market which the rest of the market follows to compete. Thanks to competition we are no longer funding for the “Big One”.
My suggestion? The Government sets a minimum rate (of which a small portion goes to the NFIP pool) for all policies to get around collusion issues and then offers a backstop like they do for TRIA where only the worst floods would they step in to stop the bleeding of insurers. Those in low hazard zones will still pay the minimums and those in high hazard zones will pay more but now we have enough income for Flood to fund the next disaster.
Thanks for your comment. It sure does make it hard to compete when you have a scenario like you mentioned.
I don’t think that Craig was suggesting collusion (interesting thought since I was just studying US v. SEUA). Rather than collusion, I actually recommend keeping abreast of other companies’ filings. Many states allow open viewing of many filing documents. As Craig mentioned, using ISO filed loss costs when you can, too.
As to government setting minimum rates, I’d rather see the states handle it. Let’s take the NFIP out of the equation altogether. The less that the Feds are involved in the business of insurance, the better off the consumers are. At least that’s my opinion.
I did not intend to imply insurers should “collude” on pricing (or with the Russians!). The flood cause of loss premiums should be determined by ISO and other rating bureaus in the same manner as they currently do for all other covered causes of loss. Individual insurers should be able to amend premiums at their discretion based on their corporate underwriting and pricing philosophy, just as they currently do for fire, wind, theft, vandalism and all other covered causes of loss.