Will Florida Create an Alternative to the National Flood Insurance Program for Homeowners?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

While Florida homeowners typically purchase insurance to protect against financial loss in the event of a fire, hurricane or other hazard that damages their home, flood coverage typically is handled outside of the standard homeowner’s policy.  Flood insurance must be obtained through the National Flood Insurance Program (NFIP).  However, a number of recent developments involving the insurance industry, Florida Legislature, and Congress might result in Florida taking the unprecedented step of offering homeowner’s an alternative to the federally run program.

The impetus for the change involves recent developments in the program that have left homeowners facing premium bills that exceed prior years by ten to twenty times.  Based on the skyrocketing cost to Florida homeowners, a conference was attended by state lawmakers, 150 insurance companies reinsurers, computer modelers, and mapping companies in December 2015.  Participants concluded that Florida was ripe for an alternative to the federal monopoly on flood coverage.  Sen. Jeff Brandes, who attended the event, contends that existing and emerging strategies for managing flood risk make private flood insurance a viable option.  More sophisticated techniques in computer modeling, flood mapping, and risk data have been developed to facilitate accurate assessment of the risk of flooding.

Currently, approximately 1.9 million Florida homeowners have coverage through the national flood program, which amounts to 37 percent of all policies.  Generally, private insurance carriers fled the flood insurance market in the 1960s following extensive and costly flooding of areas along the Mississippi River.  Since that time, a small number of private insurance companies have issued flood coverage under certain conditions generally with substantial surplus lines providers like Lloyd’s of London.

The spike in premiums that is promoting this effort to create competition in the private market stems from enactment of the Biggert-Waters Flood Insurance Reform Act of 2012.  The legislation was intended to financially bolster the NFIP because of a $24 billion dollar deficit.    Under the law, the level of premiums was to increase to an actuarially sound threshold.  However, the increases often were so staggering that homeowner’s could not bear the cost.  Although national criticism from consumers forced the federal government to scale back the rate increases, the law still permits prices to rise by 18 percent per year.

Legislation was shepherded through the 2015 session that authorized private insurers to tailor flood policies to individual homeowners rather than the one-size-fits-all approach used by the NFIP.  Examples of cost savings choices extended to consumers included permitting homeowners to purchase more limited coverage that might cover the actual cash value of the premises or the unpaid mortgage balance.

Momentum for the change also can be found in legislation currently pending before Congress.  Rep. Dennis Ross, a Republican from Lakeland, is sponsoring a bill clearly authorizing private insurers to offer flood insurance required by law covering properties in high-risk flood areas.  The legislation is expected to pass in 2016, and it has garnered bipartisan support. 

If your insurance carrier refusing to comply with its contractual obligation, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney.  My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM. 

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