Great analysis of major long term problems with the National Flood Insurance Program

I did not write this article and in fact credit Kelly of our office for finding it. We both do a lot of reading to keep up, and of course we are following the events in Houston with great interest.

Anyway, this article describes how government subsidized flood insurance is only a band-aid and in the long run is making matters much worse:


To Conferences I go…


Regular readers will remember that in March I went to Washington D.C. for a big flood insurance conference. Recently I signed up for another in Kalispell, Montana in August, which will be right before the National Flood Insurance Program (NFIP) is renewed by Congress. The content of the legislation should be known by then if they keep working at the pace they are now.

Apparently there is a lot of agreement on both sides as to what they want the bill to accomplish. Basically they are opening the system up to private insurance carriers, while still maintaining affordability standards that are part of the goal of the whole system. As you might expect, it is difficult to balance affordability with charging the correct rate for coverage. It’s a goal that really only a government can have, based on the societal goal of helping people stay in their homes in spite of the fact that sea levels are rising and the claims on flood insurance are rising each year.

Private insurance carriers have to make a profit. So they need to charge rates that will allow claims to be paid. That’s the conflict. But congress is looking at some innovative ways, like tax credits for lower income people, to help them pay for coverage.

But the news for the consumer is mostly good. The private flood insurers are able to use much more data than the government, to figure out the right rates. And frankly, many people are paying too much, based on current flood ‘zones’ that are very coarse, as opposed to the new data that is available, which will be able to tell the insurance carriers which homes that are ‘in a flood zone’ can be written at a lower rate.

Anyway, these conferences are great. They give me a chance to talk to people in other parts of the catastrophe insurance industry such as claims adjusters and the actuaries who figure the rates. I also get to hear interpretations and analyses from people very high on the ladder of such things. So I come back not only having read the rules, but also with some information on the intent, and how they will be enforced. Finally, I am able to develop great contacts at our insurance companies, which enable us to get quick, definitive answers we might not get by calling ‘customer service’. We all know from experience with phone, cable, banks, etc. that dealing with first line customer service can be frustrating. Not that the people don’t want to help, but often they don’t have the knowledge to answer any but the most basic questions, and we already know the answer to most of those!

Was This House Ever Flooded??

One of the questions we get the most from real estate agents and prospective home buyers is ‘How do we find out if a house has had flood damage?’ This is a great question, especially here on Long Island and other coastal towns in the Tri-State area after Sandy, when a lot of homes were flooded that never had water in them before.

The answer is both simple and hard at the same time. Most insurance companies report losses to a company called C.L.U.E. which stands for Comprehensive Loss Underwriting Exchange. It’s a service most insurance companies subscribe to which lets them share information on losses based on address, name, and more.

After Sandy, one of the things FEMA did was have some meetings with agents and brokers about how things were being handled. One of the questions brought up there was how the next generation of buyers would know if a home had flooded in Sandy. We specifically asked if this information was going to be made available via the C.L.U.E. or other system.

Their answer was that they consider this private information and will make it available ONLY to the property owner. Why they think this is an issue for them and not for every other insurance company doing business out there, is beyond me. As usual, they are the government and they are here to help…

So what’s the simple answer? It’s that on all flood insurance renewal policies sent to the property owner, there is a page that includes any flood insurance losses that the home has had! So you just need to ask the current property owner to show that page. It will either have the claims listed, or indicate that there have been no claims. If the property owner has already given you the correct information, this will confirm it. If they have said there have been no losses but are reluctant to provide the proof, it’s probably time to worry. And if they say they don’t have it, that can easily be solved by asking the agent/broker on the policy.

Conclusion – don’t buy a house or other property without getting the right information. Flooding is going to get worse, not better.

What you and your agent don’t know can hurt you

Our office always spends a lot of time educating ourselves about flood insurance because we deal with it on a daily basis. In fact, when this call that I am about to describe came in, I was in the process of actually reading the FEMA Standard Dwelling form, which I haven’t done in a year or so, just to keep it fresh.

I just had a phone call from a potential client. He lives in the next town over and is distressed because his flood insurance renewal went up by $1,000, to $4500. He contacted his long time agent, who represents one of the big direct writing companies. His agent has been a great help for many years on many things, but when asked about this, just shrugged his shoulders and said ‘it’s FEMA, it’s the same for everybody, and I wouldn’t know how to help’.

This agent is, I’m sure, a nice guy and very good with traditional auto and home products. But he is like many others in that they have been trained that flood insurance is just FEMA and there are ‘no differences’. In some ways, I can be selfish and say I like the idea because it means our office will look that much better, but I’m not that kind of person, and what it means to me is that people are paying more than they should be.

Unfortunately for clients, this scenario plays out daily all across the country. Not only is all flood insurance NOT the same with a new crop of private flood insurance policies available now and new ones coming out all the time, but knowledge of FEMA’s rules often allows us to find errors and choices that can reduce the rates.

From the price this person told me they were paying, I can almost guarantee that they are carrying a very low deductible, and quite possibly also getting the $250 non-primary residence surcharge if they or their agent did not follow up on the requests sent by FEMA in the past 2 years.

I was able to give him three suggestions, one or more of which I am quite confident will save them money, and if not, they will know they have a correct policy which is still better than ‘I Don’t Know’.

The person told me that they only got a couple of inches of water in their basement in the Sandy storm. So that is an indication that the house may be high enough to qualify as ‘elevated’ by FEMA’s definitions. So I referred them to an engineering firm (Gayron-deBruin) that has a unique way of handling elevation certificates. They charge a $75 fee to look at public records and maps and see if the house is likely to qualify. Then if that checks out, and you want to go on to the next step, it’s $225 to have them come and look and then IF at that time it is determined that you will benefit from an elevation certificate or LOMA (Letter of Map Amendment) they charge an additional $300. That brings their charges to the same as most firms, but ONLY if you proceed through all the steps. If they determine that the certificate will not help, the charges stop. So instead of being at risk for the whole $650 or so right from the start, many people are able to stop after the initial $75 or $225.

After it is determined whether an elevation certificate would help, our next step will be to review their current policy and suggest possible changes or corrections to lower the rate.

The final step will be to check with the various private flood insurance carriers to see if they offer a lower rate. However with the rules currently in effect, we also have to be VERY careful about moving anybody OUT of FEMA because until congress passes an expected new regulation, if a client leaves FEMA for more than 60 days, they will lose ALL their pre-Firm subsidies and have to pay the actuarial rates. This is yet another way that agents who do not keep up with all the changes might damage their client rather than helping.

This is a little long, but it’s important and it’s happening right now. For more info please contact me or our office at or

Flood Insurance – It’s not just for Hurricanes Any More

It’s storm season, folks. And in addition, increasing numbers of floods are happening in non-flood hazard areas. Two thirds of the people in the recent Louisiana floods did not have flood insurance because they were ‘told they didn’t need it’ because they are not in a high-hazard zone. AND there was only a rainstorm, not a hurricane or even a named tropical storm.

In the rainstorm that affected us here in Babylon and surrounding areas in August of 2014, I lost a 6 month old SUV on Park Ave in the Village to the floods, nowhere near ‘the water’ (Great South Bay or Ocean). In this case, over the years, increased covering of the land by buildings and parking lots to the north of us, in North Babylon, Deer Park, and Dix Hills, has messed up drainage and runoff, has caused water to stream down from towns north of us. Where years ago it was absorbed by open land, now gravity still causes the water to run south towards the bay, but it has no place to go except in the roads and streams.

FEMA bases it’s flood zones mostly on STORM SURGE from bodies of water. but even if you are not near a river, lake, bay or whatever, if you get 25 inches of rain in a day, like they did in Louisiana, drains will be overrun, and there WILL be local flooding. I was speaking with the local building inspector the other day, and he was explaining that our drainage systems are designed to handle up to 5 inches of rain in a day. The rate they were getting hit in Louisiana was 4 inches PER HOUR!

New data by AON/Benfield that we were introduced to a couple of weeks ago at the National Flood Services annual conference, is gathering lots of information on things like how much rain our municipal drainage systems can handle, where trees are likely to come down and cause a natural dam that can bring on a flood, and even where rubble from damaged buildings and trees is likely to accumulate and block waters.

They are able to do this thanks to new military-grade satellite photos and info, Google Earth, and more. As with many business models, they will be using the information to try to be sure they are charging the correct rates, which are in some cases higher and in some cases lower than what FEMA does by drawing general ‘flood hazard zones’.

It’s going to be an interesting few years as storms continue to intensify, sea levels continue to rise, and more products and options come to the flood insurance marketplace on Long Island and all over. And it will become more and more important to buy your flood insurance from someone who knows the ropes because it also is not just FEMA anymore, and pretty soon the rates will NOT all be the same.

For another interesting article from a trusted source, see this article from Consumer Reports:

Stirring the Pot in Flood Insurance, on Long Island and all over the country.

Nationwide insurance, through their Harlesville division, is pulling out of the FEMA Write Your Own (WYO) flood insurance program. This affects us on Long Island and all over. This is by no means unprecedented even among the large carriers, as Travelers, State Farm, and others have already done this.

HOWEVER, there is a major issue here. When State Farm pulled out of flood insurance coverage, I can understand that the agents did not want to lose their customers. BUT the policies were all transferred to FEMA directly, making them the largest writer of flood insurance policies, which is against their charter.

The reason is simple. In a capitalist ‘free market’ economy, the government is only supposed to do the jobs that can’t be done by the private sector. Hence FEMA is not involved in the sale or processing of most flood policies, including claims handling. These and more are handled by various private carriers and servicing operations.

So when Storm Sandy came, those insured directly with FEMA found out that FEMA is NOT set up to deal with customers or their claims. While there naturally were issues with the unprecedented damage caused by Sandy, by and large most people had decent results. The worst claim problems were those directly with FEMA.

So insurance producers, be on the lookout for FEMA policies, you will be doing a great service to your client by placing them through an active WYO carrier. For more information please visit our web sites or, or call our office at 866-669-0365

Back to the Business of Flood and Home insurance in New York and New Jersey

Welcome back to our Blog. It’s been a good while since I have posted, but I’m back and there will be more good information here on home, flood, and auto insurance for the New York and New Jersey marketplace.

The insurance market is changing very fast these days. Especially when it comes to flood insurance and excess flood. There is now a new kid on the block, known as Private Market Flood insurance. What that means is that the coverage is NOT written and backed by FEMA or the National Flood Insurance Program (NFIP). It is written by private insurance companies, mostly Lloyd’s of London. It generally gives the same exact coverage as FEMA flood policies at a lower rate.

But not everybody qualifies, it’s on a case-by-case basis. Each property has to be checked according to the company’s maps and other qualifications. And the overall problem with flood insurance is that FEMA is paying out about $4 for every $1 it takes in, so they are losing money all the time. It’s hard for a local agent like us to figure out how Lloyd’s will make money when FEMA is losing their proverbial shirts, but they think they have it figured out. It will be interesting to see if these policies are still available if we have a couple of years of bad storms.

Meanwhile, FEMA’s program continues to have rate increases and get more and more complicated. A few years back there changes to the Flood Insurance Rate Maps for a lot of the New York/Long Island/New Jersey coast. At that time, there were some homes moved IN to flood hazard zones, and many who were moved OUT.

But the responsibility for making sure the corrections were made was left to the AGENT! So we have seen many FEMA / NFIP flood insurance policies with huge mistakes in the rating. Plus a lot of people are neglecting to fill out forms for their renewal policies. These forms confirm that this house is your primary residence. If it’s a seasonal, secondary, vacation, or rental property, there is a $250 surcharge. If it’s your primary residence, the surcharge is only $25 so there is a $225 difference, with many people paying too much.

We will be posting more often so keep us in your sights. Next up – IS CAR INSURANCE GOING AWAY?  And as always, for more information or to contact us, visit us at


Hi all. It’s been a while but i have a few items to post about. This is the most important one. No matter where you live in the country, residency requirements are about to change BIG TIME for homeowners insurance. The new language says you MUST be living at the residence premises at the time the policy starts and each year when it renews.

There are many problems with this, but let’s just pick a few. What about snowbirds? What if you go into the hospital and then to a rehab center for 3 months? what if you just bought the house and want to do some work on it for a few weeks before moving in? what if you head for North Carolina and let one of your kids live in the house?

Anyway, this is going to be a HUGE issue so if you think you may have any such risk, be sure to talk with your agent. There is a partial solution in the form of a paper you can file with the insurance company advising them of the dates you won’t be there. But first of all, who thinks of that? and second, THE FIX HAS NOT YET BEEN APPROVED IN NEW YORK. But the basic language that causes the problem HAS been approved and will be taking effect at some point for most insurance carriers.


09These days our office is fielding more and more calls from people on Long Island and elsewhere who have gotten big increases in their flood insurance rates. In most cases, the increases are NOT correct, but many insurance agents and brokers who don’t write that much flood insurance are also not sure why the rate went up in each case, and then not sure what to do to correct it.

The short version of the story is that back in 2012, a few months before Sandy hit Long Island, New Jersey, and Connecticut and did a huge amount of flood damage, congress passed a change to the National Flood Insurance Program called the Biggert-Waters Act. The basic problem is that the FEMA flood insurance program is losing large amounts of money, and only collecting about 25% of what they pay out in claims. Biggert-Waters made many changes but most especially called for large rate increases on homes built before the National Flood Insurance Program went into effect. The increases would only take effect when the homes were sold, or if the home was not the primary residence of the owner (in other words, a seasonal or vacation home, or a rental property). There were many other changes as well.

After the dust settled from Sandy and the real estate agents groups found out what the Biggert-Waters Act was doing to the resale values of older homes, they called forth the lobbyists who eventually worked out the Flood Insurance Affordability Act which took effect in May of this year. This basically undid most (though not all) of the changes that were contained in Biggert-Waters.

However, the companies that service the National Flood Insurance Program on behalf of FEMA and the federal government were not able to make all the changes needed to their computer systems to undo the Biggert-Waters changes which had only  taken effect a year or so earlier. So many Long Island flood insurance policies are coming in with much higher rates that WOULD HAVE been correct under Biggert Waters. Theoretically the insurance companies are supposed to make the corrections, but practically speaking, for now it’s up to the insured to question the increase, and his or her agent or broker should be able to help get it corrected.