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For Some Homes, Private Flood Ins. May be Good Option

Actuarial experts, disaster modelers, and third-party vendors use new technology to better predict and price flood risk and Florida's private insurance market has responded.

By Toby Tobin

TALLAHASSEE, Fla. – July 24, 2017 – Actuarial experts, disaster modelers, and third-party vendors use new technology to better predict and price flood risk – and Florida's private insurance market has responded.

The number of private companies that write flood insurance policies has doubled – from 10 to 20 firms – in the past year. Since new technology can make structures more resilient than ever to flood waters, these insurers can more accurately price risk and compete with the federal government's National Flood Insurance Program (NFIP).

"Models are important because the NFIP (National Flood Insurance Program) and parent FEMA (Federal Emergency Management Agency) don't use models, they use only maps," says Lisa Miller, a former Florida Deputy Insurance Commissioner and a host of The Florida Insurance Roundup podcast, which explores the topic.

Miller says two similar homes in Zone X, for example, will pay the same flood coverage rate under the federal program. "But models help differentiate the flood risk between a property owner in Zone X with mitigation measures versus another person in Zone X without mitigation," she says. "Insurance premiums are being priced accordingly and more reasonably by the growing number of private flood insurers entering the marketplace.

"Consumers are benefiting," says Miller.

New legislation enacted this spring has encouraged the state's private flood insurance market. At the same time, the U.S. Congress is working to retain and fix the NFIP, which currently has nearly two million Florida policyholders, or about 40 percent of all NFIP policies.

Miller discussed new consumer choices and benefits on a podcast, The Florida Insurance Roundup, with Mike Graham of Smart Vent Products. Graham has been working with modeling firms that are part of the new technology and says that flood vents, dry proofing, and other mitigation options are lowering flood risks. He said homes with flood mitigation additions can save up to 80 percent of their policy premiums.

"Just as wind mitigation years ago helped lower homeowners' wind insurance rates, today's flood mitigation techniques can lower private flood insurance rates, making flood coverage more affordable – and available – for everyone," said Graham.

FEMA estimates that for every $1 spent on pre-disaster mitigation, a homeowner saves $4 in insurance claims.

On the podcast, Graham talked about some of the newest flood mitigation technologies. Flood vents, for example, allow flood water to wash into – and back out of – structures, which minimizes damage.

A study looked at a two-square mile area in New Jersey that had $1.2 million in flood claims. It found through modeling that pre-mitigation before the flood would have eliminated structural damage and reduced the entire area's flood height by one inch. While one inch sounds modest, it equates to a $20,000 cost avoidance per claim, according to FEMA.

Mitigation measures also help eliminate the need for retention ponds.

Selected flood mitigation resources listed in the podcast

© 2017 Florida Realtors. All rights reserved. Reprinted with permission.

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Don "Toby" Tobin is a licensed real estate professional affiliated with Grand Living Realty. Toby is a member of the Flagler County Association of Realtors®, the Florida Association of Realtors, Enterprise Flagler, Flagler Home Builders Association, and the National Association of Realtors.

GoToby.com proivdes real estate news, commentary, and analysis for Palm Coast and Flagler Country Florida, as well as Realtor® referrals and consultation to buyers, sellers, and developers.