Underwriting Matters

February 12th, 2020 by admin

Got my toes in the water, can in the sand … Oh, no! Now my can’s in the water!
By Todd N. Travis, AU

Although it may currently be the season for swooshing and sashaying down the winter slopes, it won’t be long before the snowpack melts, spring rains and summer storms are upon us, and flooding begins. Let’s take a few minutes to talk about flooding — what it really is and what if anything we can do about it.

As a noun, flood is an overflowing of a large amount of water beyond its normal confines, especially over what is normally dry land, and as a verb, it is to cover or submerge with water. In either case, flood is no fun.

Some floods occur suddenly and recede quickly. Others take days or even months to build and discharge. In any event, flooding is extremely dangerous and has the potential to wipe away an entire city, coastline or area and cause extensive damage to life and property. It can actually carry away objects like cars, houses, bridges, animals and even people. It can wipe out entire farms and forests. Floods can occur in varying sizes, duration and by different causes.

One of the most common is called a flash flood. This kind of flood occurs within a very short time (2-6 hours or, sometimes, within minutes) and is usually the result of heavy rain, a dam break or fast melting of snow. Intense rainfall from a slow-moving thunderstorm is a common cause of a flash flood. Flash floods are the most destructive and usually the most fatal type floods, as people are usually taken by surprise with little or no warning and no time for preparation. The impact is usually swift and devastating.

Rapid onset floods are similar to flash floods, but they usually take a bit longer to develop and will last up to a day or two instead of hours. This type of flood is also very destructive, but it does give a little time for preparation, allowing people to quickly stow or grab some property and escape to higher ground before the flooding gets really bad.

Slow onset floods are the result of rivers, lakes or other bodies of water overflowing their banks. This type of flood tends to develop slowly, giving people ample warning and time to make suitable arrangements. But when the flood finally occurs it could last for days or even weeks, causing widespread damage and the potential for other problems like mold and disease.

Any way you look at a flood, it will cause damage and difficult times ahead. Flood losses in the United States have averaged over $2.4 billion per year for the last 10 years and have only recently been overtaken as the No. 1 natural disaster in the United States by the wildfires in the western part of the country.

So, what can you do to help deter or prevent the effects of flooding on property and ourselves? If you live near a body of water you can build walls or levees, and you can plant vegetation to help with soil erosion. There are also things a community can do, such as better planning for water runoff, better building management and education of residents in any areas that may be susceptible to flooding. All of these steps will cost money, and some in reality may be unattainable. You as a company or individual can purchase flood insurance to help you reset from the damage, so to speak, when it occurs.

Flood insurance can be purchased in a couple of ways — through the private insurance market, which will be costly and possibly hard to find, or through the federal government’s National Flood Insurance Program, NFIP for short.

NFIP is an insurance program through the federal government devised to help provide financial assistance to those people suffering flood-related losses. Established as a result of the National Flood Insurance Act of 1968, NFIP began as a voluntary flood program in which local communities formally agreed to adopt and enforce floodplain management ordinances to reduce flood risk. In return for this, the federal government makes flood insurance coverage available for eligible buildings and their contents.

In the early years of the program, community participation was light. Then in 1973 — after a series of disastrous floods, most prevalent being those resulting from Hurricane Agnes — Congress passed the Flood Disaster Protection Act. This changed the program from voluntary to a mandatory program for structures located in special flood hazard areas (SFHA). In order for a community to obtain any federal regulated financing, participation and purchase of flood insurance became a requirement.

In 1983 the government initiated the Write Your Own program. WYO allowed the purchase of the federally backed flood insurance from property and casualty insurance companies. The companies were and still are responsible for the marketing, policy processing, claims administration and statistical reporting to the government. In return, the companies receive expense allowance for policies written and claims processed. This allowed for quicker and greater ability to purchase the insurance coverage, thereby strengthening the overall program.

In 1994, in order to strengthen the program further and to also to increase the policy base, Congress enacted the National Flood Insurance Reform Act. The purpose of this act was to improve compliance with the mandatory purchase requirements of NFIP by lenders, servicers and secondary market purchasers. It also increased the maximum coverage limits and added a 30-day policy waiting period, among other changes. The national Flood Insurance Program is now administered by the Federal Emergency Management Agency (FEMA) and is still evolving on an ongoing basis to continue to strengthen the protection to its policy holder and prospects.

A policy can still be purchased through a property and casualty agency and Telcom Insurance Group is one of those agencies. A purchased policy is rated based on several factors: the community in which the property is located; the particular flood zone the property is in; and the age, basic construction and structure configuration of the property.

For more information regarding the purchase of a policy though the national Flood Insurance Program, please contact your account representative at Telcom Insurance Group or contact our office directly at (800) 222-4664.

Don’t leave yourself without protection.