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From the Front Lines: Flood

"Don't assume your area won't flood," says independent agent Danny Cook, who guided his community through catastrophic flooding twice in 23 months. "Flooding is increasing in frequency and severity."
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DCookDanny Cook

Cook Insurance Services
Lumberton, North Carolina

How did you get started in your agency?

I worked with another independent agent until 1999, when he announced he was going to sell to a bank-owned agency. At that time, I decided to open my own agency. I had about six years of experience in the insurance industry and figured if I was going to start over, I’d do it as my own boss.

Why flood insurance?

At first, it was just because some of my clients had to have it for real estate closings. But my interest piqued after attending a flood class in 2001. The instructor talked about how flood insurance presents significant errors & omissions concerns.

The industry has done a better job since then, but at the time most consumers thought flood was covered in their homeowners or other property forms. Our agency initiated a mailing campaign reminding clients that flood was not a covered cause of loss unless they specifically had a separate flood policy. We had them sign a flood rejection form, which prompted calls and interest. We ended up selling some additional flood policies along the way but, just as importantly, we had documentation to show that we had reminded our clients that flood was typically not included.

In October of 2016, Hurricane Matthew devastated our community. Catastrophic flooding set records. Many viewed it as the 500-year flood, but 23 months later Hurricane Florence dumped more rain than Matthew. The local river rose higher than it did with Matthew, and so new records were set. We were punched in the gut and stood back up as most communities do, but then we were knocked back down. I’ve spoken at many events and wrote a flood class as a result of my experiences.

As we speak, we’re still recovering. It’s a long process—communities that suffer catastrophic flooding just take time to rebuild, recover and rehabilitate. But we are moving forward and I’d like to say we are standing up.

Biggest flood insurance changes?

One of the biggest changes in the industry is the concerted effort to move to a risk-based, actuarially sound premium rating. The NFIP has been in debt for a long time, largely due to the severity of storms and the inadequate premiums that have been collected along the way.

While premiums have to remain affordable, we also have to understand that premiums need to model the risks. In most of the property-casualty world, those premiums are tested and actuarially sound. Flood insurance, especially the NFIP, has lagged in those areas but we’re starting to see some attention toward premium issues that has previously been lacking. As a result of legislation, premiums are now moving toward a better reflection of the risks.

Biggest challenges?

Convincing folks they need flood insurance. After Hurricane Matthew, most of us didn’t think it would happen again. Some purchased flood insurance, but others decided to take their chances because they thought something like that wasn’t going to happen again. But then Florence set new records. They may not think that they need it, they may be 100 or 300 miles from the coast, but statistically it’s been proven that hurricanes are carrying more rainfall and catastrophic flooding events are occurring with more frequency.

Future trends?

The whole concept of private flood markets is going to be a trend to watch in the near future. In July last year, there was some final guidance given on lenders being able to accept private flood insurance to satisfy their guidelines. Prior to that final guidance coming out, a lot of lenders were not as readily accepting private flood insurance in lieu of the NFIP program. Private flood insurance is more flexible than the NFIP, generally offering higher limits and broader coverage, and in many cases, the premiums are lower.

Advice for a fellow agent?

All of the flood classes I took could never prepare me for the gravity of the flood claims process. Flood claims, at least within the NFIP, are like no other. I wrote a four-hour class to help agents be better informed.

Agents should understand a few key points. Make sure your clients know to request an advance payment because that’s probably going to be the only money they’re going to receive for at least 30 days and, quite frankly, for at least 45-60 days. They also need to understand that the named insured’s information needs to be more accurate than any other policy. If that information is incorrect, it slows down an already-slow process. Folks who don’t have flood insurance who do seek assistance from FEMA need to have an official, documented response from their insurance carrier stating there was no flood coverage.

Most importantly, don’t assume your area won’t flood. Flooding is increasing in frequency and severity and we must all understand it and offer it to our clients. At the end of the day, if they say they don’t want it, we’ve done our due diligence.

Favorite success story?

The despair, destruction and feeling of hopelessness that a community can go through after a catastrophic event—especially two in a row—stays with you. For the folks who did not have flood insurance during Matthew that subsequently listened and choose to purchase flood insurance, having a policy to rely on when Florence came gave them a sense of peace. Being an insurance agent is not just protecting livelihood and assets, but providing hope and peace to folks who, because they decided to purchase the flood insurance I recommended, can make it through.

AnneMarie McPherson is IA news editor.

For more information on dealing with catastrophic flooding, register for “In the Aftermath - An Agent's Perspective on Disaster Readiness and Recovery,” a webinar hosted by independent agent Danny Cook, who will share his experiences during Hurricane Matthew in 2016.