Your Clients Need Flood Insurance Because…
Superstorm Sandy. Need anything more be said?
One awful day last October upended the lives of thousands of New Yorkers. People were killed and injured. Homes and businesses were ruined. There was no heat, electricity and gasoline. The Atlantic Ocean reached places where the ocean is just not supposed to be. Those who had flood insurance were better prepared than those who didn’t.
The ocean isn’t the only threat. Rewind to August and September 2011. Tropical Storms Irene and Lee hit the New York City metropolitan area and several places upstate in the space of a couple of weeks. Locations in the Adirondacks, Schoharie County and the Binghamton area were under water. One member of the IIABNY board of directors, an agent from Binghamton, was out of his office for weeks.
It’s no secret that the National Flood Insurance Program has had its troubles. IIABNY received many reports from members last fall that the program didn’t have enough certified adjusters to handle the large volume of Sandy claims. However, it is always better to have insurance protection than to hope for government assistance after a storm. For one, not all areas that experience flooding get declared disaster areas. Homeowners in several upstate counties were denied federal assistance after flooding last June. For another, Congress is not automatically approving disaster relief bills anymore, though a Sandy relief bill did eventually pass in late January.
What should IIABNY members be telling their clients about flood insurance? Review the points listed below and the feature article on having the flood talk with your clients. Tell them about the latest forecast for hurricane season. Check out the resources on the flood page in the new Member Answer Center on the IIABNY website. Remind people what last Halloween was like. It was scary for all the wrong reasons.
The key points that all insurance consumers need to know are:
- Homeowners and renters insurance policies do not cover damage caused by floods.
- Every property is in a flood zone, but some zones have a higher risk of flooding than others.
- Low-to-moderate flood risk zones account for more than 20 percent of flood insurance claims and one-third of disaster assistance payments.
- One inch of water in a 2,000 square foot home can cause $21,000 in damage.
- If a person buys a flood insurance policy today, coverage will not start until 30 days from now.
What does flood insurance cover?
An NFIP policy covers building and contents against loss caused by a flood. A flood is a general, temporary partial or complete inundation of:
- Two or more acres of normally dry land area or
- Two or more properties (at least one of which belongs to the insured.)
The inundation must be from:
- Overflow of inland or tidal waters (a creek rising over its banks or tides from the Atlantic Ocean.)
- Unusual and rapid accumulation or runoff of surface waters from any source (a downpour on soil baked rock-hard)
A flood is also a situation where waves or water currents that exceed normal levels and produce this condition erode or undermine waterfront land, causing it to collapse or subside.
What doesn’t it cover?
The NFIP does not cover several types of property. This is a partial list:
- Personal property that’s not in a fully enclosed building
- Lawns, trees, plants and animals
- Walks, decks, driveways and patios
- Swimming pools and outdoor hot tubs and spas
- Most personal property located below ground level (such as in a basement.)
The policy also does not cover losses caused by:
- Loss of use of the property
- Loss of revenue or profits
- Earth movement, even if a flood caused it
- Enforcement of building ordinances or laws, other than the $30,000 coverage built into the form
- The insured’s modification of the building which increased the flood risk
- Conditions that are confined to the insured’s building (such as leaky pipes)
With only a few exceptions (a new building purchase or a refinancing,) the policy will not cover floods that occur during the first 30 days of the policy period.
What changes did the Biggert-Waters Flood Insurance Reform Act of 2012 make?
Last summer, Congress passed and the president signed a law extending and reforming the flood insurance program. The law brought badly needed stability to the program, authorizing it through Sept. 30, 2017. Among other things, it also:
- Phased out rate subsidies for secondary and vacation properties
- Made multifamily properties eligible for the program
- Raised the maximum annual premium increase from 10 to 20 percent
- Set minimum deductibles
It also required the program to create a plan for paying off its debt from Hurricane Katrina in 2005; created a council to work on flood map modernization and ordered studies of possible coverage expansions and natural catastrophe issues.
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Have the Flood Talk with Your Clients
IIABNY is encouraging its members to talk to their coastal and inland clients today about hurricane season flood risks, and make sure they have a flood insurance policy in place this hurricane season. Help them understand that hurricanes and tropical storms can cause flooding far from the eye of the storm.
One way to show clients the risk of flooding during hurricane season is to use the Flood Risk Scenarios tool produced by the National Flood Insurance Program. The tool illustrates how different factors can affect flood risk, including tropical storms and hurricanes.
Agencies and brokerages can embed the hurricane season widget on their websites for clients to test their knowledge of hurricane season flood risks, according to NFIP.
At Agents.FloodSmart.gov, you can find tools and resources to help you have the flood talk with your clients, including speaking points and barrier busters to assist in getting the conversation started. You can use the Cost of Flooding Tool to illustrate just how much damage even a small amount of water can cost to repair a client’s home. You can even embed the tool on your website for easier access. In addition, feel free to share some compelling video testimonials with your clients to illustrate the devastating effects of a flood. If you need information on selling and servicing flood insurance, refer to the Agent Field Guide.
If you haven’t already registered for the Agent Referral Program, then you’re missing out on free qualified leads. Prospective clients who visit FloodSmart.gov can enter their address into the Agent Locator Tool and be connected to an agent in their area from FloodSmart’s Agent Referral Program database. Additional opportunities for leads come from FloodSmart direct mailings and the NFIP Referral Call Center, so join now.
Also, be on the lookout in early fall for the improved Agents.FloodSmart.gov, just in time for peak hurricane season. According to Agents.FloodSmart.gov, the refreshed site will feature easier navigation with more robust search functionality, making it easier for you to find the tools and resources you need to market and sell flood insurance.
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Look to the Big 'I' Flood Program for Your Clients
The Big “I” Flood insurance program is stronger than ever and growing. As other companies are withdrawing from the National Flood Insurance Program’s “Write Your Own or WYO program, many IIABNY members have turned to Big ”I” Flood. IIABA staff has worked with Selective Insurance for many years to provide members NFIP primary coverage and access to excess flood products. Why Big “I” Flood and why Selective? First, Selective is a longtime supporter of IIABA and its member agents. And Selective, which has participated in the NFIP’s WYO program since 1984, has been rated "A" or better by A.M. Best since 1930. Through Selective, the Big “I” Flood program offers your agency:
- Personal and industry-leading knowledge from the Big “I” and Selective team
- 18 percent commission for new business and 15 percent commission
- Book rollover assistance and potential higher commissions
- Access to instant zone determination, quotes, policy changes and inquiries
- Education on flood insurance and how to protect your clients
Get started today by either registering or updating your profile for Big “I” Flood at www.bigimarkets.com. Click on the registration/update link and complete the registration. Your registration gives you access to Big “I” Flood and all the other specialty products available through Big “I” Markets.
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Featured Web Page: Flood
Be sure to visit the Member Answer Center on the new IIABNY website to gain a better understanding of flood insurance for yourself and your clients. On our recently updated Flood Page, you’ll find standard policy forms, flood maps, laws, regulations and legal opinions, as well as a link to register for the Big “I” Virtual University webinar “Critical 2013 NFIP Changes and Issues,” scheduled Sept. 5, and resources to help you sell the National Flood Insurance Program, including the Agents’ Advertising Toolkit.
Be on the Lookout for
Jamie Deapo, IIABNY’s assistant vice president of membership and member programs, writes a regular column for the Insurance Advocate. In the upcoming Aug. 19, 2013 issue of the insurance trade magazine, Deapo, who is also IIABNY’s Member Advocate, addresses how to combat the reluctance of some clients to buy flood insurance with the column entitled “I Don’t Need or Want Coverage.” Look for it when you receive your copy of the Insurance Advocate.
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Revised Outlook Predicts Atlantic Hurricane Season to be Above Average
The National Oceanic and Atmospheric Administration last week issued its updated Atlantic hurricane season outlook, saying the season is shaping up to be above normal with the possibility that it could be very active. The season has already produced four named storms, with the peak of the season – mid-August through October – about to start.
“Our confidence for an above-normal season is still high because the predicted atmospheric and oceanic conditions that are favorable for storm development have materialized,” said Gerry Bell, lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center, a division of the National Weather Service. “Also, two of the four named storms to-date formed in the deep tropical Atlantic, which historically is an indicator of an active season.”
The conditions in place now are similar to those that have produced many active Atlantic hurricane seasons since 1995, and include above-average Atlantic sea surface temperatures and a stronger rainy season in West Africa, which produces wind patterns that help turn storm systems there into tropical storms and hurricanes.
The updated outlook calls for a 70 percent chance of an above-normal season. Across the Atlantic Basin for the entire season – June 1 to November 30 – NOAA’s updated seasonal outlook (which includes the activity to date of tropical storms Andrea, Barry, Chantal, and Dorian) projects a 70 percent chance for each of the following ranges:
- 13 to 19 named storms (top winds of 39 mph or higher), including
- 6 to 9 hurricanes (top winds of 74 mph or higher), of which
- 3 to 5 could be major hurricanes (Category 3, 4 or 5; winds of at least 111 mph)
These ranges are above the 30-year seasonal averages of 12 named storms, six hurricanes and three major hurricanes.
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New Course Offers Wide-Ranging Look at ISO Changes, 8 CE Credits
IIABNY’s upcoming “New ISO 2013 General Liability Changes (and More!)” deals with the contractual provisions of three insurance contracts: General Liability, Medical Malpractice and Directors and Officers wrongful acts. Instructor Ed Meaney, CPCU, who was most recently education director for IIA of Connecticut, will use case studies to address reservation of rights actions as well as several pitfalls concerning additional insured endorsements. The General Liability section of the course will address the new ISO 2013 form changes. Areas of interest include: primary versus excess, contractual, personal injury – advertising, pollution and affect on limits. With respect to medical malpractice, attention will be directed at the conflicts of claims made form versus occurrence forms. The Directors and Officers section will focus on the not-for-profit sector and the duties of directors.
New ISO 2013 General Liability Changes (and More!) is approved for eight continuing education credits for PC, BR, C3 and PA licenses. The daylong classes begin Sept. 17 in Buffalo, Sept. 18 in Rochester and Sept. 19 in Syracuse and continue downstate and in Albany throughout the month of October.
Register online and review the course brochure for more information..
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Study: Consumers Who Go Direct for Insurance Return to Independent Agents for Value
Most customers who are lured away from independent agents by direct insurers promising lower prices will ultimately return to an independent agent, according to a recent study commissioned by The Hanover Insurance Group. The study found that nearly 60 percent of consumers who had purchased insurance through a direct channel 10 or more years ago reported switching back to an independent agent because they wanted more value.
Most consumers who switched back to independent agents cited expertise and convenience as drivers in their decision. According to the survey, the motivators for consumers who switched to work with independent agents also included the benefits of having one point of contact to handle insurance needs and questions, and, having the guidance of an experienced personal insurance professional.
"This research demonstrates that consumers really value the advice provided by independent agents and the personal relationships they build with their customers," said Mark R. Desrochers, president, personal lines insurance at The Hanover. "The majority of respondents said their number one reason for switching from a direct insurance provider was to have someone to guide them through their insurance buying decisions. Clearly trust and expertise are important to consumers."
"The study shows that consumers realize the value that independent agents bring. That's why we deliver our products exclusively through agents who are 'the value creating channel,'" said Dick Lavey, president of field operations and chief marketing officer at The Hanover. "We remain committed to independent agents, as we have for more than 160 years, because we believe the professional service and local expertise they deliver to customers is invaluable and sets them apart in the marketplace."
This study was conducted by InsightExpress, an independent marketing research firm, of 1,000 consumers who purchased insurance through direct channels 10 or more years ago.
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Recent Survey Reveals Agencies Enjoying Major Organic Growth
During the second quarter of 2013, mid-size and large privately held insurance agencies and brokerage firms experienced the most significant growth in median organic revenue since 2008, according to the Organic Growth and Profitability survey just released by Reagan Consulting. The OGP survey also found the agent-broker profitability margin to be the highest recorded since the survey’s inception in 2008.
Kevin Stipe, president of Reagan Consulting, attributes the lift to a rare “virtuous cycle” of industry trends, which he says has occurred only once every five years over the last couple decades. “Between 2008 and 2009, we were in a soft p-c market and a bad economy,” Stipe says. “Now, we’ve seen a reversal of those.”
In the midst of a growing economy and a slightly firming p-c market, the survey’s reported annual organic growth rate of 6.9 percent and agent-broker profitability margin of 24 percent “reflects all the good stuff going on underneath,” says Stipe, who sees a direct correlation between organic growth upturns and profit margin expansion. “The secret is just that revenue growth numbers are strong enough, that with productivity increases and trimming expenses, agencies can really improve their profit margins.”
Although Stipe mentions that an agency’s size and location had “little or no impact” on results, the OGP survey did reveal a private sector advantage: based on reports from five publicly held brokerage firms, privately held firms are growing 1.6 percent faster than public brokers.
Stipe also notes that the lines of business covered in the survey represent varying rates of growth, with commercial lines, employee benefits and personal lines growing at 8.2 percent, 5.5 percent and 3.5 percent, respectively. As a result, agencies that earn a larger proportion of revenue from personal lines might be experiencing lower growth rates by comparison.
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NYCM Insurance Ranked Highest by J.D. Power in Customer Satisfaction
J.D. Power ranked New York Central Mutual Highest in Customer Satisfaction among auto insurers in New York" in its 2013 U.S. Auto Insurance Study. The study measured customer satisfaction across five factors: interaction, price, policy offerings, billing and payment, and claims.
"We are truly honored to be recognized by J.D. Power for customer satisfaction excellence," said Jeremy Robinson, senior vice president of marketing for NYCM Insurance. "Every caller to NYCM speaks to a New York-based representative who understands the unique needs of New York state policyholders, and I believe that's what sets us apart from other companies. Our employees are very deserving of this recognition."
On the 1,000-point scale measuring customer satisfaction, NYCM scored 814. The average score for New York insurers was 776. J.D. Power reported that customer rankings of auto insurers nationwide were at the second-highest level since the study launched in 2000.
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