The Flood Insurance Guru Podcast Episode 25: Is Flood Insurance Headed Down the Healthcare Insurance Road?

Flood insurance has been very helpful in making sure that each house in each city gets some form of security and assistance for properties and contents whenever flooding happens. This is one of the biggest programs that the federal government started because who can stop floodings? But today, let's talk about a troubling question: is flood insurance heading down the same road as healthcare?

First, we have to understand what really happened to healthcare several years ago.

Affordable Care Act

When the Affordable Care Act (commonly known as Obamacare) came along, a lot of healthcare insurance became regulated by the federal government. This caused a lot of insurance companies could no longer make a profit the way they did, there were limited options, and they also limited agent commissions. Due to the shortage of options and lower commissions, insurance agents struggled to make a living as they did before.

As a result, the availability of healthcare went away for a little bit and options were very limited since these agents are no longer offering what they usually offer to customers before, so finding the access you needed became difficult for many people.

So, the big question, is flood insurance heading down this same road?

The State of Flood Insurance

At the time of writing, there's currently a bill in Congress that they've been working on in the past that includes cutting insurance carriers and insurance commissions on federal flood insurance. It's important however that even before this bill even passes though, the Federal Emergency Management Agency (FEMA) has seen a drastic decrease in flood insurance policies in the last five years. If you'd look into what happened with Hurricane Harvey and Hurricane Irma, more residents in many cities have been getting disaster assistance than they're getting flood insurance. 

Now, this drastic drop in flood insurance policy is already happening because the availability of the insurance agents who offer it and provide proper understanding and education to their clients are also dropping. So, what happens when you start to drop commissions? Are even more agents going to stop offering it or move away from it because they simply just can't make a reasonable living with it when there's more area where they can earn more?

If it comes to this point, we could see another drastic decrease in policies not just being available, but seeing active policies in the market because people aren't as interested since they can make more money elsewhere like we've seen in healthcare. This can create an issue with disaster assistance can really put a lot of stress on the National Flood Insurance Program and FEMA since they're not going to have active policies compared to before. It's really a domino effect that when flooding happens, there'll be pressure on paying disaster assistance from FEMA since there's no federal flood insurance in place because the availability is just not there.

Now, other than the obvious impact on NFIP claims and disaster assistance, this bill can also negatively impact educational resources on flood risks, communities and residents being aware on the cost of flood insurance premiums, coverages, flood plain devolvement, and all of that because a lot of agents are simply stopping offering them as they did with healthcare. Although private flood insurance makes big pushes on countering this, it still bears asking, will this create a bigger disaster for the market moving forward?

If you have any questions on flood insurance rates, type of coverage, availability of the private market, or anything at all, please reach out to us. Remember, we have an educational background in flood mitigation and we want to share this knowledge with you to help you preserve the value of your property long term. Click the links below to get started.