It used to be that flood insurance was all run through the federal government. According to the FEMA website, the National Flood Insurance Program (NFIP) has just under 5 million policies in force in the United States. For many years, this program provided the only option for those living in locations designated by FEMA (Federal Emergency Management Agency) as “high risk” flood areas.

The program is currently $25 billion in debt. One percent of their policies make up 50% of that debt. Over 60% of homes that had flood claims flooded a second time, and over 50% a third time. The NFIP is up for renewal at the end of September and the government is considering major changes, including offering discounts for homes with flood resistant construction. Also being considered is the Disaster Assistance Equity Act of 2017. This bill would allow condominiums and homeowner associations to receive federal assistance in the event of a natural disaster. Currently, no FEMA assistance is available for these types of communities.

Recently, more private insurance carriers are getting back into the flood insurance market. Many are offering rates that are much more competitive than the NFIP. Many carriers have “NFIP look-alike” policies, while some offer much broader coverage.

A major difference between the government and private programs is revealed when a disaster strikes. Private insurers can provide funding for repairs immediately, while FEMA programs take much longer to distribute funds.

What if insurers took the stand of, rather than just paying for repairs to these homes, they paid for the property owner to make repairs using materials which prevented or drastically reduced the amount of damage if the home flooded again?

At a recent Master Insurance Class I attended, presidents of two major flood insurance companies, Lexington Insurance and The Flood Insurance Company, talked about new programs which allow for flood repairs to be made with FEMA approved flood resistant materials. This makes these homes far less likely to suffer damage should they flood again.

With the addition of so many private insurers to the flood insurance market, it will be interesting to see what changes are made to the federal programs.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com.