Hurricane Florence will once again expose the challenges insurance carriers face with the National Flood Insurance Program. It is shaping up to be a major storm, likely causing damage and flooding throughout North and South Carolina. While my first thoughts go out to all of those affected by this storm, we will soon begin focusing on the recovery efforts. Once again, the insurance industry will be called upon to help assess and cover the damage caused by this storm. Unfortunately, one of the primary risks associated with hurricanes is flood risk from storm surge, torrential rain, and overdeveloped watershed districts, which require coverage through the National Flood Insurance Program, leading to the following:
- Coverage issues arise when losses cannot be related to a covered cause of loss in the main insurance policy on a property. In the case of a total loss, did the wind cause the loss, or did the storm surge cause the loss? The answer to that question may decide how much and what kind of coverage is afforded.
- Coverage limits could be inadequate due to flood policy provisions. Since the flood policy is separate from the main property policy, do the coverage amounts match up? Does the insured receive the same advice for both policies, or is he or she serviced by different companies? How will personal property be covered, and for how much?
- Customer service issues result from multiple policies and conflicting interests. When multiple policies cover the same property, the potential for conflict between claim handlers and servicing companies creates an environment that does not favor the insured. These conflicts widen the divide between the insured and the insurance carrier, resulting in extended claim times and delayed payments.
In the end, my hope is that the damage estimates will be overstated and that the impact to the millions of residents in the affected areas will be minimal. However, every time a storm like this one occurs, the insurance industry faces the same problems, and these are becoming all too familiar. My hope is that the insurance industry will spearhead meaningful change to the Federal Flood Program, resulting in updated flood maps, realistic premiums, appropriate policy limits, and standardized claims procedures. Only then will the customer really be properly protected.