As a young boy, Michael McMahon remembers flood adjusters working on claims at his father's agency. Fast forward to Hurricane Sandy when the McMahon Insurance Agency handled nearly 3,000 claims—invaluable experience that has given McMahon hands-on flood expertise.
How did you get started in your agency?
I got started in the agency as in infant spending time in a playpen in a backroom of the office. The McMahon Insurance Agency is a second-generation independent agency—my three brothers and sister are the second generation. Our father purchased a three-person agency in Ocean City, New Jersey in 1981 and it has since grown to 40 employees across three locations. I worked [at the agency] throughout my childhood and young adult life in an assortment of jobs from picking up the mail to processing renewals. I obtained my license and joined full time in 2005.
How did you become a flood specialist?
My interest in flood insurance started when I was young. I grew up in Ocean City, New Jersey, a barrier island in South Jersey. Our area had floods in October 1991 and December 1992 that brought flood adjusters in to work the claims. I remember our family having some of them over for dinner and the stories they told were fascinating to me. One of my early jobs at the agency was doing property inspections for replacement cost and flood vent information. This provided a good foundation from an underwriting standpoint as well as knowledge about how clients could mitigate their flood risk and premiums. Working as an account manager in personal lines gave me great hands-on experience helping clients understand their risk and the NFIP.
Hurricane Sandy is when I became an expert. Our agency had nearly 3,000 flood claims that were paid in excess of $50 million. Walking thousands of policyholders through the claims process, explaining their policy and the program’s limitations provided invaluable experience.
More than 15% of our agency’s premium volume comes from flood insurance and we have nearly 7,000 flood policies between primary and excess policies. Flood insurance has always been an important part of our business and our clients depend on our knowledgeable staff. We have a great partnership with Harleysville/Nationwide as our primary WYO company for placing NFIP policies. They provide continuing education for our staff on a regular basis.
What are you most passionate about in the flood market?
Educating consumers and demystifying the NFIP for them. I believe one of the greatest values independent agents provide to consumers is being in a position to inform and educate them of the risks they face and how to mitigate them. Flood is a risk that all homeowners face, not just those on the coast or in high-risk areas, and the NFIP is the primary way to mitigate that risk today.
What are the biggest changes you’ve seen in flood?
By far the biggest changes have come from Biggert-Waters, followed by the Homeowners Flood Insurance Affordability Act of 2014. Locally, we have had the added confusion of a remapping. These changes have brought countless questions and concerns from homeowners, realtors and prospective homeowners.
What do you say to a first-time client looking at flood coverage?
First and foremost, we explain they are in a flood zone, even if they are not in a high-risk area where flood insurance is required by mortgage companies. We always discuss securing an Elevation Certificate for properties in a Special Flood Hazard Area and how it relates to the rating of the policy. Then we provide a quote and offer suggestions on ways to reduce risk and premium. We also discuss the limitations of the policy and how those apply to the property.
What advice would you give to an agent trying to break into the flood marketplace?
Educate yourself about flood insurance. Learn the NFIP. Read the policies, understand the limitations and know how to explain them. The NFIP is not like any other insurance—it’s more like a social program than insurance. It will put a policyholder back on their feet, but rarely does it make them whole again.
Do you have a favorite flood success story?
My favorite success story is one that has happened several times: I speak with someone that has a policy with another agent who tells them their pre-FIRM policy is rated correctly and there is nothing they can do about their premium. My advice is to spend the money on an Elevation Certificate so we can give them a clear picture of the true risk rate they face. The number of times the Elevation Certificate has paid for itself is amazing!
What do you hope to see in the future for flood?
I hope to see private insurance offer a viable alternative to the NFIP. I would love to have a product available to consumers that fills the coverage gaps of NFIP for things like additional living expense, outdoor property, mobile equipment and basements. Consumers expect an insurance policy to provide them with coverage for all these things and unfortunately are very disappointed at the time of a loss.
Morgan Smith is IA assistant editor.
