Economy

Local agent discusses insurance issues after Hurricanes Harvey and Irma

Local agent discusses insurance issues after Hurricanes Harvey and Irma”

The sad, but most likely, prospect for the near future is that taxpayers will spend hundreds of billions rebuilding Houston in areas prone to suffer flood and storm damage again and again. We asked an insurance expert to explain the government program and its challenges. First, let's cover floods.

"There is no flood coverage unless they have a flood insurance policy", he said. "For the federal government to subsidize low premium disaster insurance or provide insurance in which premiums are not proportionate to risk would be to invite economic development in floodplain areas", the report warned. "We should not be losing money every year on flood insurance".

'Meanwhile, existing home owners as well as commercial entities may find their largest asset unprotected if the Federal Emergency Management Administration can't renew NFIP policies that expire. Of these policies, approximately 68 percent were on single-family homes and 21 percent on condo units.

In recent years, the number of such policies has been dropping across the country.

And why do homeowner rates and deductibles go up in states that have a disaster?

In 61 of the state's 100 counties, fewer than 1 percent of properties are covered by flood insurance.

"In the Baton Rouge (Louisiana) flood of 2016, the average disaster assistance payout was about $6,000, while the average flood insurance payout was about $80,000", he said.

"Lloyd's is actively pursuing the further development of the private flood insurance market in the U.S., which will help to promote flood insurance and encourage more people to take up cover". It also promotes the destruction of wetlands that could reduce flooding.

What does flood insurance cover?

Given the subsidized flood insurance, should we be surprised that millions of Americans live in harm's way, on flood plains?

The government program is in the red and congress may decide that needs to change. Although not the best measure of the replacement cost, the median price of new homes sold in the U.S.

Why is the National Flood Insurance Program underwater?

The National Flood Insurance Program has faced considerable criticism over its underwriting and pricing policies, which have resulted in a substantial debt. That is, it should pay for itself. Your agent should provide you with claims forms and arrange for an insurance adjuster to visit your property or look at your automobile. Meanwhile, cities like Houston - as well as New Orleans, which Higher Ground identified as the national leader in repetitive losses eight years before Hurricane Katrina - continue to sprawl into their vulnerable floodplains, aided by the availability of cheap federally supported insurance.

In the midst of this year's deadly and devastating hurricane season, state Superintendent of Insurance Eric Cioppa is urging ME homeowners to purchase flood insurance if they don't already have it.

What can be done to fix the program?

The NAR is calling on Congress to make extending the NFIP a top priority as that will give protection while the necessary work is carried out to finish reforming and reauthorizing the programme. The premiums to cover the cost of insuring such property are rather high.

If RMS' estimate is correct at $35 billion or even the upper bound at $40 billion, including up to $10 billion for the NFIP, it suggests a private re/insurance and ILS market loss of up to $25 billion or even $30 billion at the upper bound from Harvey, higher than previous estimates. The caterwauling from seaside homeowners was so loud that Congress rescinded the reforms and lowered the rates. If the risk is high, premiums will be prohibitive, and building will migrate to areas less prone to flooding.



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