As a FEMA Certified Flood Adjuster and the owner of a flood specific adjusting company, I do care about the success of the National Flood Insurance Program (NFIP) along with the sustainability for all stakeholders. Too many people have a tendency to compound the problems of the NFIP verses providing solutions. I am one of the people looking for solutions and thereby sustainability.
The flood program is based upon the National Flood Insurance Program Act of 1968 with insurance carrier (WYO’s) participation several years later. The National Flood Insurance Program (NFIP) is a federal program administered by FEMA and not a typical insurance carrier homeowner policy. Too many people are confusing the word “policy” with the word “program” and we need to get back to the basics of the National Flood Insurnace Program for sustainability and transparency.
Instead of looking at the NFIP solutions from a “forty thousand foot level”, lets start on the ground. I believe as a FEMA certified flood adjuster we have a unique understanding of the problems and concerns facing the sustainability of the NFIP. We are the face of the flood program as a policyholders first engagement is with the flood adjuster, who are the boots on the ground.
This is a Federal Program, similar in nature to that of Medicaid, Obama Care, and other federal assistance programs. For example most people on Medicaid purchase an additional gap policy to cover costs not paid by Medicaid. So in keeping with this concept, consider the following.
Currently, the NFIP provides coverage for flood damage to property and contents under the Standard Flood Insurance Policy (SFIP) to indemnify a policyholder from direct damage by and from flood. With that being said, the program needs to re-brand itself as the Standard Flood Utility Policy (SFUP). As a Utility Policy, the program would only pay for average grade materials and labor based upon a published FEMA/NFIP unit cost data base. FEMA/NFIP provided unit cost data base would use the loss location zip code with appropriate market conditions in determining the cost for average grade materials and labor. If FEMA/NFIP does not want to publish a unit cost data base they can contract with an outside data base firm. There are several firms and publications that produce unit cost data bases for the construction industry that are available. The FEMA/NFIP unit cost data base would be distributed quarterly with updated unit costs associated with a catastrophe to the estimating programs that are used by the flood adjusting community. This data base would also be made available to the public providing transparency. The FEMA/NFIP unit cost data base could also be used by other federal assistance programs providing funding for catastrophic loss repairs. FEMA along with the NFIP needs to have one unit cost data base and thereby provide transparency. That word transparency keeps popping up.
Many properties have upgraded/custom materials and unit cost are arbitrary, depending on the flood adjuster, contractor or public adjuster providing a flood damage estimate. Any upgrade/custom materials with labor can be accounted for with a “Gap Policy” purchased by the policyholder through an insurance carrier. Currently there are a few carriers offering an excess policy to accompany the SFIP form. For example to include additional basement coverage, additional living expenses higher limits for decks and so on. Why not add a custom/upgrade excess coverage as well.
Based upon the implementation of a FEMA/NFIP National Unit Cost Database and Re-Branding the National Flood Insurance Program as a Utility Policy, the aforementioned solutions are a win-win for all stakeholders involved and here is why.
- The policyholder now understand exactly what they are going to be paid based upon direct damage by and from flood with a published national unit cost data base.
- The ambassadors of the NFIP, the certified flood adjusters focus on the damage details, ie scope ensuring accuracy. The policyholder, working with the flood adjuster would ensure the scope of flood damages are accurate without the anxiety of cost discrepancies.
- Most push back from policyholders is always about the cost of items or their contractors estimate pricing is far higher than the flood adjusters estimate. With a national unit cost data base for average grade material and labor, pricing does not become an issue.
- Supplemental claims based upon policyholders contractors estimates would not exist unless a specific scope issue was missed by the flood adjuster.
- The TPA/WYO claims examiners focus on scope and applicable coverage verses the unit costs, as there is a consistent national unit cost data base.
- There would be very limited litigation as most litigation is based upon perceived under payments. This would be a multi million dollar savings to the FEM in litigation expenses and claim settlement payments. Understand there will be some litigation based upon coverage interpretation, but not cost.
- If litigation becomes apparent relative to cost, that would be directed to the WYO’s gap policy and their adjustment of the custom material/item, as long as the policy holder purchased this gap policy.
- Premium costs can be precisely determined as the program has identified the level (utility policy) of coverage.
- Claim overpayments based upon a FEMA or IPIA audit cost interpretations would almost be non-existent.
- Flood damage estimates between WYO policyholders would show the same unit cost as certified flood adjusters working with different WYO’s not being able to deviate from the FEMA/NFIP National Unit Cost Database. Consistency and transparency relative to damage estimates become the norm under the NFIP.
- Carriers (WYO’s) now have another income stream with the providing GAP Flood Endorsement.
- Flood claims would close more quickly with claim payments getting into policyholders hands faster.
- Provides a Positive Flood Claim Experience for the policyholder as the NFIP is now transparent.
I am sure there are several other benefits not mentioned above along with many nay sayers. However, I am presenting a solution that provides sustainability and transparency. The NFIP needs to change quickly and aforementioned changes would provide a starting point in moving forward to a sustainable National Flood Insurance Program.
Michael Carli