A friend showed me his Florida homeowners policy that contains the statement “THIS POLICY MEETS THE DEFINITION OF PRIVATE FLOOD INSURANCE CONTAINED IN 42 U.S.C. 4012A(B)(7) AND THE CORRESPONDING REGULATION”, and lists a flood deductible. There is no mention of a separate FEMA policy.
I was under the impression that nobody was covering flood without a separate FEMA policy, which costs at least $700.
Comments?
Private flood definitely exists, though I wasn’t aware of companies writing it in Florida. It’s only about $3B nationally, so not large.
Yep. “Write Your Own” is still a thing where a company willing writes the coverage with their company’s branding. Then the company cedes that portion of the premium–less “commission fees”–to FEMA.
The company subsequently will handle any claims and admin processes of the policy.
Chubb writes a bunch. Neptune is one of the biggest private flood writers in FL.
In today’s NYT there’s an article about a private flood insurance broker (Neptune Flood) lobbying to abolish the NFIP.
Neptune is remarkable. They compete with government subsidized insurance on price! By pulling away all the best risks that aren’t being well priced by the NFIP.
I’m all for abolishing the NFIP.
0% chance they compete on price where the actual flood risk is.
That’s my point. NFIP uses lower resolution modeling resulting in lumpy pricing, so Neptune pulls away the mispriced risks, which is remarkable since the NFIP in general is underpriced.
NFIP is subsidized by design, not underpriced.
Mountainhawk hits it on the head with the addition that the timing of the cash flow is usually “after the fact” rather than up front (like normal insurance).
writing flood insurance isn’t illegal, is it?
so why don’t these free market solutions just show up and win it all by doing it better than NFIP? they don’t need NFIP to vanish
Because they don’t want to compete against subsidized policy premiums.
IFYQ
Actuarially underpriced
And the bigger issue is the poor segmentation, which allows Neptune to be successful.
IIRC from exam 6 cherry picking like Neptune is doing is a big driver for why the NFIP exists to begin with.
Because it’s a social benefit, not an insurance product.
I’m not sure you see my point. You can have well segmented, underpriced insurance and poorly segmented, underpriced insurance. In the former case Neptune would fail. In reality they’re very successful because the NFIP does a poor job pricing, even if you allow for a large negative profit provision.
If this were true, Neptune wouldn’t have a need for NFIP to be eliminated.
Who says it’s a need?