Policyholders Need to be Educated on Importance of Flood Insurance

By David I. Maurstad | March 10, 2008

Eroding levees, flood map changes, lack of buyers highlight need for public outreach


Levees can also erode and decay over time and require regular maintenance and upkeep to continue to offer the level of protection they were designed to provide.

In the United States, floods are the most common natural disaster, yet shockingly enough, only a tiny fraction of homes are covered by flood insurance. Should a property suffer flood damage, residents without flood insurance coverage might have to rely on a federal disaster declaration (which is not automatic) and federal loans, which must be repaid with interest. With flood insurance protection, however, the homeowner is in good position to recover since flood insurance claims are paid even if a disaster is not declared by the President.

A study conducted by the National Association of Insurance Commissioners last year revealed that 33 percent of homeowners believe — incorrectly, I might add — that flood damages are covered under a standard homeowners policy. So, in an effort to reverse misconceptions about homeowners policies and flood coverage, the National Flood Insurance Program turns to the agent to help advise homeowners on critical insurance needs and requirements. And flood insurance — the best available protection against rising water — needs to top the list.

Levee Risk, Flood Map Changes

Insurance industry professionals should educate their customer base about the unique risks associated with levees. From California to Maine, thousands of miles of levees snake along rivers, lakes and coastlines to help reduce damage from flooding. However, no levee provides full protection from flooding. In more serious flood events, levees can be overtopped or fail and the damage that results can be catastrophic — a fact that New Orleans, La., and Aberdeen, S.D., residents know all too well. Levees can also erode and decay over time and require regular maintenance and upkeep to continue to offer the level of protection they were designed to provide.

In addition to the risks associated with levees, insurance professionals need to stay informed about changes to flood hazard maps, also known as Flood Insurance Rate Maps, or FIRMs. Flood hazard maps identify high-risk areas — called Special Flood Hazard Areas, or SFHAs — where property owners holding mortgages from federally regulated or insured lenders are required to purchase flood insurance. Maps are being updated across the United States to reflect the most current data on flood risk. As part of the process, flood risks behind levees are being reexamined. Depending on the condition of levees and other factors, flood risk status for residents in certain areas could change from low- to high-risk, or vice versa.

What Agents Can Do

As an insurance professional, your customers rely on you to keep their homes and businesses financially protected. To help property owners obtain proper coverage, you should keep them informed about mandatory purchase requirements and be prepared to answer questions about changing flood risks, particularly if a customer’s property is now being mapped into a high-risk area.

However, if your customer’s property is located in a low- to moderate-risk area, where flood insurance is not required, property owners need to know that their flood risk doesn’t necessarily end at the line on a map. In 2007, nearly one-third of all flood insurance claims were submitted from properties outside of high-risk areas, where flood insurance is not required by federally regulated or insured lenders. For properties outside of high-risk areas, insurance providers can inform their customers that they may qualify for low-cost flood insurance — called Preferred Risk Policies (PRP) — to protect their homes, businesses and contents from potential flood damage for as little as $120 a year.

As we move from late winter to early spring, a time when snowmelt, ice thaw and heavy rains increase flood risks, agents should contact their customers about obtaining flood insurance as it takes 30 days after purchase for a policy to take effect. It is critical that agents get the message out to their customers prior to the beginning of spring flooding season. We encourage you to recommend the following steps to your customer base.

Understand the risk: Individuals can learn more about their flood risk by visiting FloodSmart.gov or calling 800-427-2419.

Plan for evacuation: Plan and practice a flood evacuation route, and ask someone out of state to be a “family contact” in an emergency.

Purchase flood insurance: Flood insurance can financially protect a home, regardless of a person’s flood risk.

Tools For Successful Agents

There are many ways you can grow your flood insurance clientele. The first step could be to examine your current book of business to identify opportunities.

Second, work with your Write-Your-Own company to take advantage of any marketing initiatives they may offer.

Finally, register and log in to Agents.FloodSmart.gov. There, you will find resources that will not only help educate you about flood insurance as a product, but also where, when and how to sell it. Resources available at Agents.FloodSmart.gov include:

  • Training and Education: Training is an absolute necessity when it comes to selling flood insurance. It allows you to maintain your knowledge of the product, enhance your FloodSmart expertise, and stay on top of industry trends.
  • Marketing and Advertising: By participating in the Advertising Co-Op Program, you can increase your media buying power. This program helps you evaluate how you advertise, provides tips to help you create a marketing plan, offers tools to help you advertise and gives you money back in the process. A new addition is also available — the Mail On-Demand program — that will allow you to create a direct mail campaign from concept to execution.
  • Agent Referral Program: Sign up for the Agent Referral Program and connect with qualified leads. Through FloodSmart.gov and the NFIP Call Center, customers and prospective customers learn about flood zones and estimating insurance costs. When they are ready to find an agent, we’ll put them in touch with you.
  • Selling a Policy: From policy forms for agents writing through the NFIP Servicing Agent known as the NFIP Direct, to the complete flood insurance manual, you will find everything you need to write flood insurance.
  • Claims and Services: Find tools, resources and information to help you simplify the claims process and provide top-notch service to your clients in the event of a flood.

As an insurance agent, you are the key to protecting the financial assets of your clients from damage caused by the number one natural hazard: floods.

Topics Agencies Flood Property Homeowners Training Development Policyholder

About David I. Maurstad

David I. Maurstad serves as assistant administrator of Federal Emergency Management Agency’s Mitigation Directorate and Federal Insurance Administrator. Phone: 800-427-4661. Web site: Agents.Flood.Smart.gov.

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Insurance Journal West March 10, 2008
March 10, 2008
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