Flood - The History, Details, Marketing and Selling of Flood Insurance

Transcription

1 Flood - The History, Details, Marketing and Selling of Flood Insurance Sponsored By:

2 Flood Insurance The History, Details, Marketing and Selling of Flood Insurance Please turn off cell phones and stow away. Thanks Disclaimer The information in this outline is to be used as a guide only. Neither the author, M.A.I.A., affiliates, or any other organizations associated with this are liable for misprints, typos, interpretations held different from any person or organization. Riders, endorsements, coverage, and any policies not being able to cover exposures are the agent and company responsibilities. 9:00-9:30 Why did Congress form the NFIP 30 minutes Because property policies exclude coverage for the peril of water Let s examine ISO s DP, HO, CP and BOP forms What s the likelihood of a flooding peril event happening Myths and facts regarding the NFIP if the insured had prior flood peril damage, lives in a Special Flood Hazard Boundary and had what about businesses Federal disaster assistance will not necessarily pay an insured for a full value flood claim and insureds should not rely on much if anything in the way of relief after a flooding disaster What NFIP insurance program does the insured enter when a number of prior losses have been paid by the NFIP on their property and how do we need to coordinate their property form with the NFIP Marshall Katz MS, LUTC, CIC, LIA, AAI 1

3 9:30-10:00 Marketing flood insurance 30 minutes Because disaster can strike quickly and without warning sometimes and as stated and examined in the 1st ½ hour standard ISO forms exclude coverage What are examples of flooding events and what may not be one What NFIP form should an insured acquire and why Are there other policy forms available and from whom, let s examine them Making flood insurance a part of every day at the agency Rejection of flood insurance coverage by an insured and why do we need to do this Monday morning quarterbacking after an uninsured event and when do we bring our insurance policy into play Property policies exclude coverage. Marshall Katz MS, LUTC, CIC, LIA, AAI 2

4 Because property policies exclude flood coverage. Congress created the program in 1968 Very few bought coverage In 1973 Congress tied into Federally backed mortgages and very bought In the mid-1980 s Congress stared fining banks for not requiring coverage in SFHA s People started buying DP GENERAL EXCLUSIONS A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. Marshall Katz MS, LUTC, CIC, LIA, AAI 3

5 3. Water This means: a. Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water or spray from any of these, all whether or not driven by wind, including storm surge; b. Water which: (1) Backs up through sewers or drains; or (2) Overflows or is otherwise discharged from a sump, sump pump or related equipment; c. Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure; or d. Waterborne material carried or otherwise moved by any of the water referred to in A.3.a. through A.3.c. of this exclusion. This Exclusion A.3. applies regardless of whether any of the above, in A.3.a. through A.3.d., is caused by an act of nature or is otherwise caused. This Exclusion A.3. applies to, but is not limited to, escape, overflow or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system. However, direct loss by fire or explosion resulting from any of the above, in A.3.a. through A.3.d., is covered. Let s make it bigger,shall we. 3. Water This means: a. Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water or spray from any of these, all whether or not driven by wind, including storm surge; This is the exclusion the NFIP is addressing. Marshall Katz MS, LUTC, CIC, LIA, AAI 4

6 b. Water which: (1) Backs up through sewers or drains; or (2) Overflows or is otherwise discharged from a sump, sump pump or related equipment; This is the one we buy-back on the property form by enhancement or endorsement. c. Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure; or Not for the NFIP and no endorsement I know of will cover this? Marshall Katz MS, LUTC, CIC, LIA, AAI 5

7 d. Waterborne material carried or otherwise moved by any of the water referred to in A.3.a. through A.3.c. of this exclusion. The NFIP may cover some of this issue if contents were inside, if trailer was strapped down, etc. This Exclusion A.3. applies regardless of whether any of the above, in A.3.a. through A.3.d., is caused by an act of nature or is otherwise caused. Water nothing don t even think about it. Marshall Katz MS, LUTC, CIC, LIA, AAI 6

8 This Exclusion A.3. applies to, but is not limited to, escape, overflow or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system. The NFIP will cover this. However, direct loss by fire or explosion resulting from any of the above, in A.3.a. through A.3.d., is covered. So the water made everything so wet it caused a fire really? Marshall Katz MS, LUTC, CIC, LIA, AAI 7

9 HO BP Same as DP B. Exclusions CP We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. Marshall Katz MS, LUTC, CIC, LIA, AAI 8

10 g. Water (1) Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind (including storm surge); (2) Mudslide or mudflow; (3) Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment; (4) Water under the ground surface pressing on, or flowing or seeping through: (a) Foundations, walls, floors or paved surfaces; (b) Basements, whether paved or not; or (c) Doors, windows or other openings; Or (5) Waterborne material carried or otherwise moved by any of the water referred to in Paragraph (1), (3) or (4), or material carried or otherwise moved by mudslide or mudflow. This exclusion applies regardless of whether any of the above, in Paragraphs (1) through (5), is caused by an act of nature or is otherwise caused. An example of a situation to which this exclusion applies is the situation where a dam, levee, seawall or other boundary or containment system fails in whole or in part, for any reason, to contain the water. But if any of the above, in Paragraphs (1) through (5), results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage (if sprinkler leakage is a Covered Cause of Loss). So the CP Added mudflow and mudslide as an additional exclusion. While the other forms define under the earthquake exclusion. Added Sprinkler Leakage as an additional give-back. Marshall Katz MS, LUTC, CIC, LIA, AAI 9

11 What s the likelihood of a flooding peril event happening MA Data Annual Policy Data Written number of policies 58,058 In-Force Insurance Coverage $13,368,706,500 Written premium In-Force $66,099,332 Loss Data : 01/01/ /31/2012 (34 years) Total Number of Losses 30,039 Total Claim Payments $324,739, Closed Losses 23,815 Open Losses 83 CWOP Losses 6,141 (Closed Without Payment) Marshall Katz MS, LUTC, CIC, LIA, AAI 10

12 Calendar Year 1978 $147, $483, $230, $127, $198, $439, $254, $368, $126, $105, $51, $661, $167, $353, $710, $659, $411,075 Loss Dollars Paid Countrywide 06/18/2012 (000) 1995 $1,295, $828, $519, $886, $754, $251, $1,277, $433, $780, $2,232, $17,740, $640, $613, $3,470, $776, $767, $1,847,882 Calendar Year Premium Countrywide 06/15/ $111,250, $141,535, $159,009, $256,798, $354,842, $384,225, $420,530, $452,466, $518,226, $566,391, $589,453, $632,204, $672,791, $737,078, $800,973, $890,425, $1,003,850, $1,140,808, $1,275,176, $1,509,787, $1,668,246, $1,719,652, $1,723,824, $1,740,331, $1,802,277, $1,897,687, $2,040,828, $2,241,264, $2,604,844, $2,843,422, $3,066,729, $3,187,065, $3,340,390, $3,467,427,875 Marshall Katz MS, LUTC, CIC, LIA, AAI 11

13 Premium Claims Loss Ratios 1978 $111,250, $147,719, $141,535, $483,281, $159,009, $230,414, $256,798, $127,118, $354,842, $198,296, $384,225, $439,455, $420,530, $254,643, $452,466, $368,239, $518,226, $126,385, $566,391, $105,432, $589,453, $51,023, $632,204, $661,658, $672,791, $167,897, $737,078, $353,682, $800,973, $710,225, $890,425, $659,059, $1,003,850, $411,075, $1,140,808, $1,295,578, $1,275,176, $828,039, $1,509,787, $519,537, $1,668,246, $886,362, $1,719,652, $754,971, $1,723,824, $251,721, $1,740,331, $1,277,005, $1,802,277, $433,647, $1,897,687, $780,658, $2,040,828, $2,232,291, $2,241,264, $17,740,312, $2,604,844, $640,968, $2,843,422, $613,247, $3,066,729, $3,470,711, $3,187,065, $776,981, $3,340,390, $767,625, $3,467,427, $1,847,882, $45,961,818,956 $40,613,136, adjust for 2005 $22,872,824, Marshall Katz MS, LUTC, CIC, LIA, AAI 12

14 Myths and facts regarding the NFIP if the insured had prior flood peril damage MYTH: You can t buy flood insurance if you are located in a highflood risk area. FACT: You can buy National Flood Insurance no matter where you live if your community participates in the NFIP, except in Coastal Barrier Resources System (CBRS) or other protected areas. The Program was created in 1968 to make federally backed flood insurance available to property owners who live in eligible communities. Flood insurance was then virtually unavailable from the private insurance industry. The Flood Disaster Protection Act of 1973, as amended, requires federally regulated lending institutions to make sure that mortgage loans secured by buildings in high flood risk areas are protected by flood insurance. Lenders should notify borrowers, prior to closing, that their property is located in a high-flood risk area and that National Flood Insurance is required. Marshall Katz MS, LUTC, CIC, LIA, AAI 13

15 National Flood Insurance Program: Frequently Asked Questions Repetitive Loss Q: What is a repetitive loss property? A: A Repetitive Loss (RL) property is any insurable building for which two or more claims of more than $1,000 were paid by the National Flood Insurance Program (NFIP) within any rolling tenyear period, since A RL property may or may not be currently insured by the NFIP. Currently there are over 122,000 RL properties nationwide. National Flood Insurance Program: Frequently Asked Questions Repetitive Loss Q: Why is the NFIP concerned with RL structures? A: Structures that flood frequently strain the National Flood Insurance Fund. In fact, the RL properties are the biggest draw on the Fund. FEMA has paid almost $3.5 billion dollars in claims for RL properties. RL properties not only increase the NFIP s annual losses and the need for borrowing; but they drain funds needed to prepare for catastrophic events. Community leaders and residents are also concerned with the RL problem because residents' lives are disrupted and may be threatened by the continual flooding. Marshall Katz MS, LUTC, CIC, LIA, AAI 14

16 Federal disaster assistance will not necessarily pay an insured for a full value flood claim and insureds should not rely on much if anything in the way of relief after a flooding disaster MYTH: Federal disaster assistance will pay for flood damage. FACT: Before a community is eligible for disaster assistance, it must be declared a federal disaster area. Federal disaster assistance declarations are issued in less than 50 percent of flooding events. The premium for an NFIP policy, averaging a little over $500 a year, can be less expensive than the monthly payments on a federal disaster loan. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to remain eligible for future disaster relief. Marshall Katz MS, LUTC, CIC, LIA, AAI 15

17 What NFIP insurance program does the insured enter when a number of prior losses have been paid by the NFIP on their property and how do we need to coordinate their property form with the NFIP Severe Repetitive Loss Properties These must be processed by the NFIP Special Direct Facility. Refer to the Severe Repetitive Loss section of this manual for information. I. GENERAL DESCRIPTION The primary objective of the Severe Repetitive Loss (SRL) properties strategy is to eliminate or reduce the damage to property and the disruption to life caused by repeated flooding. Approximately 11,900 insured properties have been identified with a high frequency of losses or a high value of claims. As these policies come up for renewal, they will be transferred to the National Flood Insurance Program (NFIP) Servicing Agent s Special Direct Facility (SDF). Marshall Katz MS, LUTC, CIC, LIA, AAI 16

18 The close supervision the SDF provides the group of policies, and the attention the group of properties receives when mitigation decisions are made, contribute to attaining the strategy s primary objective. The SRL group consists of any NFIP-insured property that has met at least 1 of the following paid flood loss criteria since 1978, regardless of ownership: 4 or more separate claim payments of more than $5,000 each (including building and contents payments); or 2 or more separate claim payments (building payments only) where the total of the payments exceeds the current value of the property. In either case, 2 of the claim payments must have occurred within 10 years of each other. So lets say the building has a fire. The city or town states tear it down. FEMA now requires the building elevated 15 from the current setting or move onto a new foundation and remove the old one How do we spell building ordinance the exclusion, the give-back and buy-back? Marshall Katz MS, LUTC, CIC, LIA, AAI 17

19 1. Ordinance Or Law Ordinance Or Law means any ordinance or law: a. Requiring or regulating the construction, demolition, remodeling, renovation or repair of property, including removal of any resulting debris. This Exclusion A.1.a. does not apply to the amount of coverage that may be provided for in E.11. Ordinance Or Law under Section I Property Coverages; b. The requirements of which result in a loss in value to property; or c. Requiring any "insured" or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, pollutants. Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. This Exclusion A.1. applies whether or not the property has been physically damaged. HO the exclusion 11. Ordinance Or Law (excerpted) a. You may use up to 10% of the limit of liability that applies to Coverage A for the increased costs you incur due to the enforcement of any ordinance or law which requires or regulates: (1) The construction, demolition, remodeling, renovation or repair of that part of a covered building or other structure damaged by a Peril Insured Against; (2) The demolition and reconstruction of the undamaged part of a covered building or other structure, when that building or other structure must be totally demolished because of damage by a Peril Insured Against to another part of that covered building or other structure; or (3) The remodeling, removal or replacement of the portion of the undamaged part of a covered building or other structure necessary to complete the remodeling, repair or replacement of that part of the covered building or other structure damaged by a Peril Insured Against. HO the give-back Marshall Katz MS, LUTC, CIC, LIA, AAI 18

20 HO the buy-back Because disaster can strike quickly and without warning sometimes Marshall Katz MS, LUTC, CIC, LIA, AAI 19

21 Where can flood waters originate from? Oceans Hydrants Rivers Streams Lakes Rain storm Snow melt Water truck Swimming pool Water tower Golf course irrigation pond Water runs down hill. Is the insured property downhill from a water source? D e s c r i b e a F l o o d Flood, as used in this flood insurance policy, means: 1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: a. Overflow of inland or tidal waters; b. Unusual and rapid accumulation or runoff of surface waters from any source; c. Mudflow. 2. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in A.1.a. above. Marshall Katz MS, LUTC, CIC, LIA, AAI 20

22 Mud Flows Mudflows are rivers of liquid and flowing mud on the surface of normally dry land, often caused by a combination of brush loss and subsequent heavy rains. Mudflows can develop when water saturates the ground, such as from rapid snowmelt or heavy or long periods of rainfall, causing a thick liquid downhill flow of earth. Mudflows are different from other earth movements, such as landslides, slope failures, and even moving saturated soil masses in which masses of earth, rock, or debris move down a slope where there is not a flowing characteristic. Damage from mudflows is covered by flood insurance; damage from landslides and other earth movements is not. Mudslides can also be covered, if defined exactly as the Standard Flood Insurance Policy defines Mudflow What NFIP form should an insured acquire and why Marshall Katz MS, LUTC, CIC, LIA, AAI 21

23 3 policies to choose from: Dwelling Form for Residential exposures 4 Family Home General Property Form for Commercial exposures Residential Condominium Building Association Policy Form (RCBAP) for residential condos for the master Residential Condominium Building 1-4 family homeowner X Tenants in apartment Residential Condominium unit 5 or more family residential building Any Business What form for what situation? Commercial condominium building Residential condominium building & common contents Dwelling General RCBAP X X X X X X Marshall Katz MS, LUTC, CIC, LIA, AAI 22

24 Or maybe another carrier that has entered the flood insurance marketplace? Ezflood Catcoverage Myprivateflood Etc. FloodSmart.gov The Official site of the NFIP Agent Co-Op Advertising Program Agent Referral Program (Leads) Consumer Information, Public Outreach Marketing, Advertising, Media Relations What s Your Flood Risk? Marshall Katz MS, LUTC, CIC, LIA, AAI 23

25 Radio Public Service Announcements Scripts "SPRING CLEANING" ANNOUNCER: There are always things you mean to get around to. Like spring-cleaning. But put that off and the worse that can happen is a few more dust bunnies under the bed. Put off protecting your home against flooding and you could lose everything. And new flood policies take 30 days to take effect. So don't wait. Call or visit floodsmart.gov today. Brought to you by the National Flood Insurance Program Radio Public Service Announcements Scripts "UNINVITED GUESTS" ANNOUNCER: We've all had uninvited guests. You know, the ones that just "drop by". But it's the ones that plant themselves on your couch and show no signs of leaving that you really have to worry about. You can look at rainstorms the same way. Slow-moving storms dump so much rain inland; they've caused some of the worst floods in history. And experts say this year's storm season could be even worse. Protect your home today. Call or visit floodsmart.gov. Brought to you by the National Flood Insurance Program. Marshall Katz MS, LUTC, CIC, LIA, AAI 24

26 Radio Public Service Announcements Scripts "7-DAY FORECAST" ANNOUNCER: Next time you check the 7-day forecast, remember, it takes 30 days for a new flood insurance policy to take effect. So no matter how many sunny days appear to be on the horizon, there's no time to waste. Fact is, rainstorms can cause flood damage hundreds of miles from the coast. To find out how to protect your home against flooding, call or visit floodsmart.gov today. Brought to you by the National Flood Insurance Program If you re in sales or management and are responsible for growth of the agency, think marketing flood today, tomorrow and always. Get a consistent game plan going. Marketing Flood Insurance Effort involved Need at least 6-7 attempts before the consumer notices you are sending stuff to them Need another 4 or more before they may buy Asking once at point of sale isn t really doing enough Consider a renewal department to ask at each property policy renewal Marshall Katz MS, LUTC, CIC, LIA, AAI 25

27 Marketing Flood Insurance Consider appointing someone as a flood specialist; So they are the go to person So they are set up for it So they gain knowledge and So that everyone is not fumbling when time to work with the NFIP Making flood insurance a part of every day at the agency How: Part of the new business offering Part of the renewal process Part of the endorsement process With every insured Need a system in place to make it easy for staff to offer the right coverage If they don t buy Marshall Katz MS, LUTC, CIC, LIA, AAI 26

28 Flood Insurance Acknowledgement Form Standard property policies including but not limited to homeowners policies, dwelling policies, or commercial property insurance policies exclude coverage for flooding events. As your insurance agency, we strongly recommend that you purchase flood insurance and excess flood coverage if values exceed the maximum coverage available on the primary policy. It is possible that coverage as recommended below may not be available from the carriers we represent. I hereby acknowledge the acceptance, rejection, or unavailability of flood and excess flood coverage as indicated below. It will be conclusively presumed this election, rejection, and/or acknowledgement of unavailability will apply to all future renewals, continuations, changes or replacements thereof. Property Address: Current flood zone for above: Determination by; Mortgagee Insurance Company Type Coverage Coverage / Premium Accept Reject Unavailable 1 Building Coverage $250,000 - $460 Contents/Personal Property $100,000 included Excess Building Coverage $150,000 - $300 Excess Contents/Personal Property $50,000 - $200 Named Insured Rejection Form Have one signed by all insureds Insured s Signature Date Address of Property Agent / CSR Signature Date 1 Means the agency cannot find a market and encourages you to try and find a policy. Monday morning quarterbacking after an uninsured event and when do we bring our insurance policy into play? Dial the number Tell them what agency your calling from and Let your E & O carrier guide you through the process and Our limit per occurrence is only what Marshall Katz MS, LUTC, CIC, LIA, AAI 27

29 Questions Comments Suggestions? Thank you for sharing your hour with MAIA and myself! Enjoy the rest of the day. Marshall Katz MS, LUTC, CIC, LIA, AAI 28