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Flood Insurance News: Flood Insurance Increases Seem Limited

In our last post, we took a look at some figures found by the National Flood Insurance Program (NFIP) regarding the increase of flood insurance policies in areas that were hit particularly hard by recent natural disasters.

The president of the Independent Insurance Agents of Connecticut (IIAC), Warren Ruppar, said that the storms that have affected the East Coast, especially Connecticut, have made a significant impact on residents, and have made them acutely aware of the need for flood insurance. The NFIP reported that Connecticut residents’ insurance policies increased to 43,365, which is a 5.6 percent increase. Ruppar said, “There is room for improvement” in terms of getting more of Connecticut to protect themselves against future floods.

Colorado was the state that had the third-highest increase in flood insurance policies in the last year. However, there seems to be a stigma about flooding among Colorado residents, because the state is completely land-locked. Many seem to think that flooding shouldn’t be a primary concern because there are no costal barriers to worry about.

The reason that flash flooding is such a high risk in Colorado is that the state has experienced a high number of massive wildfires over the last few years. There were four of the most costly wildfires in history over the last three years, and each fire caused upwards of $100 million in damages according to the Rocky Mountain Insurance Information Association (RMIIA). The executive director of the RMIIA hopes that wildfires can be “teachable moments” about the necessity of flood insurance protection.

There have been many efforts by the NFIP and other industry leaders to try to educate the public about wildfires and how they correlate to flood risks. Officials are hopeful that some of that public education has made an impact and has opened some eyes to the serious threat of floods in Colorado, regardless of their in-land location.

There’s a tremendous concern in the flood insurance industry for the areas that have seen decreases in policy holders. Areas that haven’t been heavily affected by flooding, such as Wyoming and Texas, have seen flood insurance decreases—6 percent and -2.2 percent respectively. The fear is that “people are looking at cost versus what they think the threat is,” according to Walker. Especially in Texas, where they have been in a drought for the last three years, many residents likely doubt that flooding will be an issue for them anytime in the near future.

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Flood Insurance Increases After Hurricane Sandy

In the last several years, many areas in America have been hit hard by natural disasters such as hurricanes and massive wildfires. Two areas in particular have been in the Northeast and in Colorado, which is where the National Flood Insurance Program (NFIP) has cited there have been the biggest flood insurance increases.

As a result of the devastation in the wake of Hurricane Sandy in October 2012, New York had the largest growth in flood policies between September 2012 and September 2013. According to reports from the NFIP, flood insurance policies in New York increased to 194,650, a growth of 15.5 percent. Clearly, many New Yorkers felt the imminent need to get protection after the storm surge they endured during Sandy.

The president of the New York Insurance Association (NYIA), Ellen Melchionni, expressed that in the aftermath of Hurricane Sandy, many New Yorkers unfortunately became aware of the serious consequences of not having flood insurance coverage. She noted that New Yorkers responded similarly after Hurricanes Irene and Lee, but not to the same extent.

Although Melchionni said that the NYIA is optimistic about the flood insurance increases in New York, there’s still a significant lack of homeowners who have actually invested in flood insurance. According to reports, throughout all of the high-risk areas for flooding in New York, only 25% of properties in those areas have flood coverage. In areas that are low-to-moderate risk, only 24% of properties have flood insurance policies. There’s some consideration that the only reason so many New Yorkers have recently obtained flood insurance is to comply with the conditions of receiving federal financial assistance after the disasters. Many Federal Emergency Management Agency (FEMA) policies require participants to maintain a flood insurance policy to continue receiving financial assistance.

Across the nation, flood insurance increases only averaged 0.5 percent in the past year. The states that had the most insurance policy growth, after New York, were Connecticut, Colorado, New Jersey, and Massachusetts.

In our next post, we’ll investigate more of the NFIP findings after the recent natural disasters that have hit the United States.