Flood Insurance Market: Greater Affordability and Uniformity Underway

Government’s National Flood Insurance Program might be in the doldrums, but a few steps are being undertaken to ensure that coastal communities get some relief. The Senate recently passed a bill that will stimulate more flood insurance reforms. At the heart of these reforms lies the limitation on premium hikes. These efforts don’t clearly address the actual reasons that were causing the premiums to jump, but consumers will be happier with the news of government capping on premiums.

Menendez-Grimm Bill

Agents in the coastal community insurance niche have been repeatedly voicing their concerns about limited benefits and almost negligent scope for offering financial sops. This insurance marketplace remains highly pessimistic with minimal consumer addition. Now, some degree of grandfathering has been allowed in the policies. This is largely applicable to communities with updated flood maps. Now, agents will be able to offer subsidies along with standard coverage as a result of the Menendez-Grimm bill. Other changes that this Bill brings to the flood insurance marketplace include:

Overall Affordability

The Bill seeks to make the entire flood insurance marketplace more uniform and affordable. Overpriced policies, i.e. those with an annual premium greater than 1% of the total coverage amount, will be gradually eradicated.

Streamlining Property Sales

Until now, coastal homebuyers were paying the full risk rate at the time of buying homes. Now, pre-FIRM properties will be exempted from this provision. Property owners have been wondering about how to prevent the steep decline in their property valuations. Many coastal properties have been rendered unfit for sale due to this environment. Now, the entire marketplace will breathe easy. This also means better equality for home buyers and sellers.

Firewalling Premium Rises

FEMA has been asked not to increase the annual rates beyond a certain value—the limitation ranges between 15 and 18 percent. This is welcome news for agents as consumers interested in individual policies are often questioned about the recent, unwarranted hikes.

Reverting to Good Old Grandfathering

Grandfathering has been present in many of the traditional insurance markets, including the healthcare sector. However, coastal community properties didn’t enjoy this advantage. Homeowners were left with two expensive choices—either pay higher rates or take upon large scale property restructuring. With grandfathering kicking in and premiums with a defined cap, homeowners don’t need to fret about rising out-of-pocket expenses.

Widespread Refunding

Some folks have complained about a little clarity about the refund procedure for homeowners who had unconsciously overpaid. Until now, FEMA didn’t provide any clarity on this issue. Now, overpaid premiums will be adjusted in the form of nationwide refunds.

Better Communication: More Outreach & Transparency

Map determinations get more assistance to ensure that communities and policyholders abiding by the regulations are benefited. Agents have often struggled to advise consumers on how to finance the appeal. With more appeal reimbursements, homeowners will be repaid for their flood risk related knowledge. The flood insurance niche has been somewhat opaque. Usually, agents have been at the forefront of bearing consumer queries with little clarity from the state or federal government. Now, prospective policyholders can demand answers for flood mapping and hikes in rates from clearly defined organizations. With more information available about flood risks and map appeals processes, policyholders will feel more secure.

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