Flood Insurance

Aon Provides Flood Guidance

Aon produced an agents’ guide covering newly-effective changes to the National Flood Insurance Program
By: | November 1, 2017

As people in Florida, Puerto Rico and other areas struggle to recover from devastating hurricanes and storms, new regulations from the Federal Emergency Management Agency (FEMA) regarding flood water coverage took effect October 1. Knowing, interpreting and communicating those changes is essential for insurance agents as they write policies that could prove to be lifelines for customers.

With that in mind, Aon National Flood Services compiled an eBook to help agents better understand the changes to FEMA policy, agents’ responsibilities and how the changes will affect consumers.

“Our goal is to make a difference in people’s lives by helping them protect what is important,” said Cynthia DiVincenti, Vice President at Aon National Flood Services.

“Providing eBooks on various topics, including the NFIP changes, allows us to help educate insurance professionals so that they can best serve their clients. This booklet is geared toward insurance agents, so they have the tools they need to work with their clients.”

FEMA’s Insurance Role

A federal agency, FEMA’s mission is to support citizens and first responders in their efforts to build, sustain, protect and prepare for catastrophic events, such as floods, and provide support when those events do occur. The agency develops extensive maps of floodplains and assigns levels of risk to properties based on their proximity to floodplains. The risk level is a determining factor in insurance rates.

Cynthia DiVincenti, Vice President, Aon National Flood Services

According to FEMA’s website, NFIP works to “reduce the impact of flooding on private and public structures by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations.”

These efforts help mitigate the effects of flooding. Overall, the program reduces the impact of disasters by promoting the purchase and retention of general risk insurance and specifically flood insurance.

Importantly, FEMA sells insurance for property owners and renters through its National Flood Insurance Program (NFIP). This service is crucial for those whose standard policies do not include specific flood insurance.

Write Your Own Program

FEMA participates also in the Write Your Own (WYO) Program, a collaboration between the private insurance industry and FEMA which allows property and insurance companies to write and service the Standard Flood Insurance Policy. Insurers receive an expense allowance for policies written and claims processed but the federal government underwrites losses.

Homeowners, business owners and renters at properties located in an NFIP-participating community, can purchase policies. Agents should be prepared to determine if a customer’s property is within a NFIP- participating community and can use the Community Status Book or Community Flood Map as a reference.

Still, many property owners, and some renters who also qualify for NFIP, don’t have flood insurance. For example, FEMA notes that more than 800,000 property owners in at-risk locations in Florida alone are without flood insurance, making booklets such as Aon’s product a beneficial tool for industry professionals working with clients to better protect their homes and other possessions.

The Changes

Regulations and changes sometimes can be cumbersome to interpret. Aon tries to educate its agents with its timely and easy-to-read publications.

One change that agents will enjoy conveying to their customers is reduction in the cost of the federal policy fee for renters’ insurance to $25. This is a 50 percent reduction, making it now more affordable.

“Staying in the information loop is an ongoing and vital task for all agents.” – Cynthia DiVincenti, Vice President, Aon National Flood Services

This change applies to renters that renew or purchase flood insurance on or after October 1, 2017. Insurers will receive by mail and must update the “Tenant Indicator” on contents-only policies within 15 days of receipt. If the letter is not returned on time, the fee defaults to the previous $50 fee.

“In order to validate those policyholders eligible for the reduced fee, agents with contents-only policies are required to provide information to indicate if the policyholder was a tenant,” said DiVincenti.

Another change: surcharges will be pro-rated instead of fully earned on policies that are cancelled for specific reasons such as building sale, content removal, the insurer no longer requires it or in the event of a mortgage payoff.

“Staying in the information loop is an ongoing and vital task for all agents. FEMA publicizes changes to regulations six months prior to the effective date and much of the information is available on their website.

“As a trusted advisor, insurance agents need to be current on the various types of insurance products they sell and service. The information within the eBook provides agents with the latest changes to the NFIP,” said DiVincenti.

For more information visit www.FloodSmart.gov.

To read the Aon eBook go to http://october2017.nfipchanges.com/. &

Mercedes Ott is the former managing editor of Risk & Insurance. Comments or questions about this article can be addressed to [email protected].