A new carrier has entered the Florida flood insurance market with a policy it says will provide better coverage than what is available from the National Flood Insurance Program.
Ormond Beach, Fla.-based Security First Insurance Co. has launched an optional flood and water backup product on new and existing homeowners, dwelling fire owner, and dwelling fire landlord policies. The new coverage protects against flooding as well as damage caused by water that backs up into a home from sewers, drains, or overflows from a pool or sump.
Security First’s entrance into the Florida flood market brings the total number of primary or excess private market flood writers in the state to 25.
The coverage is available statewide by endorsement only with no waiting period for new business and renewals. It is reinsured by Swiss Re, which also helped Security First develop the product.
According to Melissa Burt DeVriese, chief administrative officer and general counsel for Security First, the company had been developing the coverage for six years and wanted to offer something different than what is available from the NFIP and other products modeled after that policy.
“We thought we want to do it right and serve our customers well,” Burt DeVriese said. “We don’t think the NFIP is a good policy – it has a lot of limitations and exclusions.”
Locke Burt, president, founder and chairman of Security First, echoed that sentiment.
“Under the NFIP, homes are either in a flood zone or not. As a result, far too many homeowners believe if they aren’t in a flood zone, they don’t have flood risk,” he said. “But that’s simply untrue – if you live in an area where it rains, you are susceptible to flooding. Now, thanks to advances in technology and legislative changes, we can offer broader coverage at better pricing, a much better alternative to flood insurance coverage offered by the NFIP.”
Security First’s coverage includes coverage limits of $100,000 up to $1 million for Coverage A (the structure), up to coverage amount selected on policy limits for Coverage B, and up to coverage amount selected on policy (full replacement cost) for contents/personal property. Coverage is available for alternative living expenses for home displacement and a limit of $5,000 for water backup sump overflow coverage is included. Security First also does not require an elevation certificate in order to bind coverage.
Burt DeVriese said 80 percent of Security First’s 300,000 or so eligible customers could obtain coverage for $150 or less based on their current policy limits. The goal, she said, was to make the coverage affordable and accessible for the many Floridians who currently are not protected from flood.
“We are not looking to compete with NFIP,” she said. “We are looking at the vast majority of people who don’t have flood coverage.”
Burt DeVriese added that another feature of the coverage is customers will have just one deductible and in the event of a claim, just one company to work with and one adjuster. For agents, they can quote the flood coverage for a client right along with a homeowners policy.
“On every new policy that we write there will be a [flood endorsement] price there and the agent can bind a policy assuming they meet our underwriting guidelines,” she said.
For customers who choose to add coverage during their policy term, they can call or contact their agent to do so at any time but there will be a 30-day waiting period before coverage takes effect. Security First does exclude repetitive loss properties.
Burt DeVriese said with the technology and modeling capabilities available today, Security First was able to come up with a policy it thinks is right for its customers.
“There is a big difference between when the private industry said this was an uninsurable risk and today – and that has to do with technology,” she said.
The Florida private flood insurance market has grown significantly since the state passed legislation in 2014 to encourage private insurers to offer flood insurance. According to the Florida Office of Insurance Regulation, there are currently 25 insurance companies in Florida that are eligible to write primary or excess flood insurance for personal lines outside of the NFIP. OIR said there are also additional carriers who are eligible to write coverage on a limited basis.
OIR said in a statement that it has “proactively worked to expand Florida’s private flood insurance market and hopes to gain additional writers soon.”
Between June 30, 2017 and March 31, 2018, the number of insurers eligible to write private flood insurance in Florida increased 30 percent over the previous reporting period, OIR said, and as of April 2018, private carriers have written 33,676 personal primary flood insurance policies in Florida.
“This coverage is usually offered at prices similar to or lower than those of the NFIP, providing more consumer choice and an alternative to the federal program,” OIR noted.
Some carriers have been hesitant about writing flood insurance in Florida, saying it will not be a profitable market because the exposure is too great. Security First’s Locke Burt spoke of his concerns on a carrier panel at a 2017 flood insurance conference by the Florida Association for Insurance Reform (FAIR), saying there was a reluctance to innovate on flood insurance policies and noting the risk of storm surge in Florida that makes it a challenge to underwrite and accurately price.
But Burt DeVriese said because of the modeling and mapping capabilities used for the new Security First flood product, the company is now confident about entering the flood space.
“There is always a risk with any product, but you try to price and develop a policy that you will hope will work,” she said. “The biggest hurdle for insurers selling private flood is getting people to understand they have a risk and their homeowners insurance policy doesn’t cover it… the biggest risk out there [with flood insurance] is people don’t buy it.”
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