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Simplifying the Claims Process with Private Flood Insurance Companies

Updated: Jun 21, 2023

a home protected from a flood
Simplifying the Claims Process

What’s worse than standing in three feet of water in your living room? Complications and delays in getting your flood claim handled.

Hopefully, you’ve already purchased a flood insurance policy through either the National Flood Insurance Program or a non-NFIP insurance policy from a private flood insurance company, but what happens when you need to file a claim? Though we all hope we never have to find out, it’s beneficial to understand how the process differs between the NFIP and private flood insurance companies.

Policies obtained from private flood insurance companies are privately backed, meaning the insurer assumes the risk. They define how their policies are underwritten and administered, and they determine how claims are paid.

NFIP policies are very different. An NFIP policy can be obtained through what is known as a “Write-Your-Own” insurer (WYO). These policies can be purchased through insurance agents and brokers but are administered by the Federal Emergency Management Administration (FEMA) with funds appropriated from Congress.

WYOs are private insurance companies contracted to sell NFIP policies under their companies’ names. The WYOs receive a commission from the NFIP for selling these policies and for any claims they process. Unlike true private flood insurance companies, WYOs do not assume the risk that private insurers do; instead, the federal government holds the risk.

Although all of this is important, what’s key to point out for the purposes of this article, is that policies sold through WYOs are also subject to the NFIP’s claims process, while private insurers, like those working with, can streamline their own process.

Claims made against NFIP policies must be inspected and paid out by an NFIP-certified claims adjuster. After a major storm or natural disaster, certified claims adjusters can sometimes be spread thin, trying to settle a large influx of claims. Because private flood insurers are not required to use NFIP-certified claims adjusters, they are sometimes able to have more adjusters available after a catastrophe and can get checks into the hands of policyholders swiftly. These adjusters are just as qualified as the NFIP adjusters but may not retain the specific paperwork and courses required by the NFIP.

Another noteworthy distinction between NFIP claims and those handled by private insurers, are the options available to policyholders should something go wrong during the claims process.

Say an adjuster failed to respond to communication regarding a claim, or denied a claim without conducting a reasonable investigation, a private insurance policyholder could file a report with their state insurance commissioner. State insurance departments have the authority to impose penalties upon insurers who do not meet required codes of conduct. Recourse for NFIP policyholders is sometimes more limited since the NFIP is subject to periodic Congressional oversight or the federal court system.

While getting comprehensive coverage and a great rate may be top of mind for most of us when shopping for flood insurance, don’t forget to consider the claims process. No one wants to wait in a soggy living room for the next available NFIP-certified adjuster if they don’t have to.



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