I lost count of how many times this Flood Insurance Program ‘Can’ has been kicked a short distance down the road. Perhaps it’s time SOMEONE in Washington realized it’s best left to the private insurance industry to solve the problem and mitigate the risks through adequate rate tables that discourage rebuilding in high likelihood flood plains? I doubt politicians will have the courage to ‘start the end’ of NFIP as we know it. Hello, insurance CEOs! Are you listening?
Could not have said it any better. The government needs to get out of the flood insurance business and stop encouraging people to build in flood prone areas.
Actuarily sound seems an unfamiliar term to Congress. Private Flood insurance has access to better data to enable more accurate determinations for more accurate pricing even in NFIP mandatory zones. There is a huge Protection Gap that must be filled. And profitably.
I expect predictive modeling used for property cat perils (Wind/ Hurricane, EQ) will be used in a manner similar to quantify the flood risks on a more accurate basis, perhaps in zip or sub-zip detail. Or, it’s already being done. But AIR Worldwide or ISO Verisk needs to do the ‘heavy lifting’ for such models, as they have the know-how and access to data (or know what new data to collect/ assemble)…. to enable smaller insurers to participate in the market.
Have you seen that ISO is in the process of rolling out a flood product–forms and rates–for both personal and commercial? This could be a huge step forward in the ability of the private market to adequately cover this peril.
I saw that, but only was able to read it briefly. Thanks for your post that educates other readers! That is a step forward because the ISOs involvement enables smaller insurers to participate in risk-taking they’d not otherwise be able to comfortably quantify (ISO actuarial rates) and underwrite (ISO forms). Hooray for McCarran-Ferguson! With those small insurers entering the market comes competition, innovation for a competitive edge, improved market efficiency, and thus, better value products for consumers. A win-win situation.
Polar: Excellent comments. The same reasoning also applies to the Texas Windstorm Insurance fiasco. TWIA. The state should never be in the direct insurance business. The TWIA was created to expand government involvement. Before TWIA, there was a pool which required carriers to write in the “first tiers” based on a pro-rate of the amount of property insurance written across the entire state. Carriers could write themselves out of the pool by voluntarily writing in the first tier to the level that would have been required. Rates for the remaining risks reflected the exposure. Those living in other areas of Texas should never be required to subsidize those insane enough to build on the waters edge.
The National Flood program suffers much like Florida’s Citizens property insurance market does, and that is from adverse selection and inadequate rates. I’m sure that somewhere there is a successful government run insurance program for …… for something, but I’ve not seen it.
National Flood could ease themselves out by reducing limits and writing excess coverage positions, but ultimately they need to either let the private sector handle flood or allow for traditional actuarial studies to determine rates charged. Either way, property owners are going to pay more for this coverage – I’m already seeing rate increases through Nat. Flood.
I lost count of how many times this Flood Insurance Program ‘Can’ has been kicked a short distance down the road. Perhaps it’s time SOMEONE in Washington realized it’s best left to the private insurance industry to solve the problem and mitigate the risks through adequate rate tables that discourage rebuilding in high likelihood flood plains? I doubt politicians will have the courage to ‘start the end’ of NFIP as we know it. Hello, insurance CEOs! Are you listening?
Could not have said it any better. The government needs to get out of the flood insurance business and stop encouraging people to build in flood prone areas.
Actuarily sound seems an unfamiliar term to Congress. Private Flood insurance has access to better data to enable more accurate determinations for more accurate pricing even in NFIP mandatory zones. There is a huge Protection Gap that must be filled. And profitably.
I expect predictive modeling used for property cat perils (Wind/ Hurricane, EQ) will be used in a manner similar to quantify the flood risks on a more accurate basis, perhaps in zip or sub-zip detail. Or, it’s already being done. But AIR Worldwide or ISO Verisk needs to do the ‘heavy lifting’ for such models, as they have the know-how and access to data (or know what new data to collect/ assemble)…. to enable smaller insurers to participate in the market.
Have you seen that ISO is in the process of rolling out a flood product–forms and rates–for both personal and commercial? This could be a huge step forward in the ability of the private market to adequately cover this peril.
I saw that, but only was able to read it briefly. Thanks for your post that educates other readers! That is a step forward because the ISOs involvement enables smaller insurers to participate in risk-taking they’d not otherwise be able to comfortably quantify (ISO actuarial rates) and underwrite (ISO forms). Hooray for McCarran-Ferguson! With those small insurers entering the market comes competition, innovation for a competitive edge, improved market efficiency, and thus, better value products for consumers. A win-win situation.
Polar: Excellent comments. The same reasoning also applies to the Texas Windstorm Insurance fiasco. TWIA. The state should never be in the direct insurance business. The TWIA was created to expand government involvement. Before TWIA, there was a pool which required carriers to write in the “first tiers” based on a pro-rate of the amount of property insurance written across the entire state. Carriers could write themselves out of the pool by voluntarily writing in the first tier to the level that would have been required. Rates for the remaining risks reflected the exposure. Those living in other areas of Texas should never be required to subsidize those insane enough to build on the waters edge.
The National Flood program suffers much like Florida’s Citizens property insurance market does, and that is from adverse selection and inadequate rates. I’m sure that somewhere there is a successful government run insurance program for …… for something, but I’ve not seen it.
National Flood could ease themselves out by reducing limits and writing excess coverage positions, but ultimately they need to either let the private sector handle flood or allow for traditional actuarial studies to determine rates charged. Either way, property owners are going to pay more for this coverage – I’m already seeing rate increases through Nat. Flood.