Hurricane Matthew: How Is FEMA Involved with My Flood Insurance?
If this is the first time you have had to contact your flood insurance company about a loss, it can be confusing to understand why or how FEMA has anything to do with your flood insurance. The reason that FEMA is involved with flood insurance is that FEMA is charged with administering the National Flood Insurance Program. In the late 1960s and into the 1970s, many insurance companies stopped writing flood insurance policies because they were losing money on the policies. The flood damages were just too widespread and catastrophic for insurance companies to insure. Because people needed flood insurance to protect their property, the federal government stepped in and passed legislation that created the National Flood Insurance Program.
The National Flood Insurance Program (“NFIP”) has two programs: the NFIP direct program and the “Write Your Own” (“WYO”) program. Both programs issue Standard Flood Insurance Policies (“SFIPs”), collect premiums, handle and adjust claims, and issue payments to insured. The same identical SFIPs are issued under both programs. Under the direct program, the issuance, handlings and payment of claims is handled directly by the federal government.
The WYO program was started in 1983. It allows private insurance companies to issue and service federally backed SFIPs under their own names, collect premiums, and pay claims. They are reimbursed by FEMA for these services. The flood policy is backed by the federal government rather than the private insurance company and claims and expenses are paid from U.S. Treasury funds. The WYO program now accounts for approximately ninety-percent (90%) of all flood insurance policies. Most of the well-known property and casualty companies participate in the WYO program.
Private flood insurance policies and excess flood insurance policies still exist, but are not subject to FEMA administration or rules, and are only subject to the terms set forth in the policy between the insurance company and the policyholder.
About the Author: Christopher W. Gerold is an attorney in Chiesa Shahinian & Giantomasi’s (“CSG”) Disaster Recovery Claims Group. Chris represents homeowners, condominium associations and businesses with their insurance claims with a special focus on flood insurance. For more information on flood insurance and ways CSG can help you with your flood insurance claim, please contact Chris at (973) 530-2061.