A Rising Need for Flood Insurance Is in the Forecast

Colorado State University's hurricane forecasters predict an active 2010 hurricane season with 15 named storms, eight hurricanes and four major hurricanes. This prediction is in contrast to an average season of 10 named storms, six hurricanes and three major hurricanes.

Hurricanes and tropical storms are not the only causes of floods. Snow melts can pose significant flood risks as well. This winter, the East Coast was hit with three major snowstorms, setting an all-time record for snow in the month of February. Some areas received nearly two feet of snow in a 36-hour period, setting a record for accumulation in a single day. As the snow begins to melt and the ground is still frozen, there is little absorption or drainage. With no place for the snow to go, flooding ensues.

All it takes is a few inches of water from a flood to cause devastating financial loss. Since standard homeowners insurance does not cover flooding, Congress created the National Flood Insurance Program (NFIP) in 1968 to help provide a means for property owners to financially protect themselves. According to the NFIP, over the past 10 years, the average flood claim has amounted to over $33,000. Homes and businesses with mortgages from federally regulated or insured lenders and that are located in high-risk flood areas are required to have flood insurance.

Floods are the most common natural disaster in the U.S. Contrary to popular belief, floods are not limited to coastal areas; they can happen almost anywhere. Nearly one-quarter of all the NFIP's paid insurance claims are in low- to moderate flood-risk areas, according to the NFIP Web site.

Flood insurance can be purchased only through an insurance agent; therefore, insurance professionals will need technical and practical knowledge and skills to confidently and accurately handle all aspects of flood insurance coverage. Two excellent resources are the National Flood Insurance Program Flood Insurance Manual and the Mandatory Purchase of Flood Insurance Guidelines booklet. The flood insurance manual is primarily used by insurance companies and agents who write national flood insurance. It provides in-depth information about the NFIP and flood insurance, including eligibility, coverage, premium rates, and policy types. The guidelines booklet provides guidance to key legislation that governs the NFIP.

Because the NFIP is part of the Federal Emergency Management Agency (FEMA), insurance professionals involved in writing, selling, or providing flood coverage must comply with Homeland Security and FEMA requirements. The NFIP has created guidelines and tools to assist insurers and agents in providing broader access to flood insurance to the public. Recent guidelines require producers of flood coverage to receive certified flood insurance training in order to maintain licensing.

In response to the increasing need for flood insurance, The Institutes have teamed up with FEMA to create the new Associate in National Flood Insurance (ANFI^TM) designation, which is among The Institutes' numerous educational offerings. Click here for more information.

Donna J. Popow, JD, CPCU, AIC, is senior director of knowledge resources and ethics counsel for The Institutes in Malvern, Pennsylvania. The Institutes are the leader in delivering proven knowledge solutions that drive powerful business results for the risk management and property-casualty insurance industry. Ms. Popow is responsible for all aspects of claims education, including the Associate in Claims designation program and the Introduction to Claims program. She can be reached at popow@cpcuiia.org.

© 2010 American Institute for CPCU

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