“With the world experiencing more extreme weather events, the value of flood insurance is a lesson that is more important than ever,” says independent agent Lisa Sharrard. “Some homeowners pay off their mortgage, cancel their flood policy and believe they will never be required to carry it again—until they seek financing or decide to sell their home.”
Choice Flood Insurance LLC
Columbia, South Carolina
How did you get started at your agency?
Becoming an agent was a natural progression of my career. Prior to starting a private consulting business resolving issues with flood insurance premiums for agents and insureds, I had been working with clients for over 25 years in the public sector as the South Carolina state coordinator for the National Flood Insurance Program (NFIP) and as a trainer for the NFIP Direct servicing contract. After receiving encouragement from my consulting clients, I opened my agency in 2016.
Why flood insurance?
Flood is my specialty and has been throughout my career. Through my consulting work, I came to realize that not many potential buyers researched flood risks, and associated insurance costs, prior to buying or renting a home or other property. Once the Biggert-Waters NFIP Reform Act of 2012 passed, I realized that securing affordable flood insurance in real estate and mortgage transactions was crucial. With my background and extensive knowledge in floodplain management, mapping and mitigation, I was able to combine those skills and knowledge of insurance to assist clients with obtaining more affordable premiums.
Challenges in the flood insurance market?
Educating potential clients that Mother Nature does not read a flood map. With the world experiencing more extreme weather events, the value of flood insurance is a lesson that is more important than ever. Some homeowners pay off their mortgage, cancel their flood policy and believe they will never be required to carry it again—until they seek financing or decide to sell their home. Some homeowners regret canceling their flood insurance policy. If there is a lapse in coverage, a 30-day wait applies, they lose any subsidies or grandfathering that they may have once enjoyed, and rather than being on the glide path to full risk rate, they feel the immediate financial impact of the new actual rates.
Another big hurdle this year under the NFIP's Risk Rating 2.0 is communicating flood risk to homeowners. For years, FEMA marketed a cheaper flood policy in “X" flood zones, known as Preferred Risk Policies (PRP). Through multiple storm events, FEMA has learned that approximately a third of the claims made are in the lowest risk flood zone. Risk Rating 2.0 removes the flood zones from being at the forefront of premium calculation. As a result, we are seeing premium increases for some new business policies because the hidden subsidies are being removed, thus reflecting the true risk that was not considered under the legacy rating.
With the release of Risk Rating 2.0, FEMA has adopted a similar rating model as private insurers, which will create more competition with the private market.
Advice for a fellow agent in the flood insurance market?
Agents should offer flood insurance to clients. If you don't have the staffing resources, or the knowledge, there are flood insurance professionals you can partner with who won't compete with your other insurance lines. Also, don't forget to offer coverage for full replacement value, excess flood insurance or additional coverages.
Favorite flood insurance success story?
Obtaining a flood insurance premium refund of $25,760 for a client's beach house.
Olivia Overman is IA content editor.