![]() ![]() Yeates said consumers are hesitant about new companies as a rule, so the more data that insurance companies can offer to offset that uncertainty and model the future will lead to more acceptance of the new insurance model. The development of sophisticated algorithms and analytics could allow them to understand flood risk better than the government and avoid huge losses, Yeates McChristian said. ![]() Private companies can't function at multi-billion dollar losses the way the NFIP can, so they are forced to work smarter, Yeates said. A new insurance modelīut how can private insurers make money where the NFIP is losing billions? Albert also said the government is likely to take action encouraging the growth of private flood insurers like Neptune when they reauthorize the NFIP after the midterms. Neptune currently has about 5,000 policies in 21 states, and Albert expects it to expand to 48 states by the end of 2019. The NFIP insures about 5 million homes in the United States, down from a peak of 5.7 million in 2009, while experts estimated there are about 40 million homes at risk. Neptune is the only company that Albert knows of that offers private direct-to-consumer policies. Most private insurers - such as Liberty Mutual and Allianz - currently are used to cover high-value homes and provide coverage beyond the NFIP's limit, but companies are expanding into "first dollar" coverage, Yeates said. The American private flood insurance market grew by more than half last year to reach 15 percent of the total. That's why they're billions of dollars in debt with this program." "It doesn't work that way with the federal government. "You try to envision what losses are going to be and price it appropriately because you have to have the money in advance to pay out claims," she said. Lynne Yeates McChristian, a spokesperson for the Insurance Information Institute and a risk-management and insurance instructor at Florida State University, said the private market is more equipped to offer better, and also more inexpensive, flood insurance. "The NFIP is a great program because it provided a flood option to people who didn't have it, but what it should be is an insurer of last resort," Albert said. Their flood maps are out of date almost as soon as new ones are released, he said, and its not taking in even close to as much money as its giving out.Įxpansion of private insurers in the market is a "no-brainer," said Jim Albert, CEO of Neptune Flood, which was just named to the CNBC Upstart 100 list of promising, early stage start-ups. Climate change had made its problems far worse by increasing the frequency and magnitude of floods, Moore said, which the NFIP was not built to handle. It needs to be reauthorized by the federal government every five years and hits that mark next month. The NFIP has generally been successful over the years at its goal of expanding flood insurance availability, Moore said, but now, "The program is broken on just about every level." As a result, many consumers are unprepared if a disaster strikes. Any homeowner with a federally backed home mortgage is required to buy additional flood coverage if they are in a designated high-risk area, but it is optional for everyone else. The program creates flood maps to determine what homes around the country are at-risk for floods, it sets rules for building on the coast, and, perhaps most significantly, it requires flood insurance for anyone the government determines has at least a 1 percent chance of flooding in a given year and offers its own policies for sale. "Essentially, it's Obamacare for flooding decades before Obamacare was created for health insurance," said Robert Moore, a senior policy analyst with the Natural Resources Defense Council and expert in flooding in climate change. It's a government-run program that fills the void in standard homeowners' policies that may exclude storm surge and flooding that can cause catastrophic damage. The National Flood Insurance Program was established in 1968. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit ![]()
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