Flood insurance-necessity or commodity? Statistics show that U.S. hurricane landfall sparks awarenes

Oct. 13, 2008 - PRLog -- In a survey on HomeInsurance.com, 32 percent of polled homeowners responded that flood insurance, despite a home’s location, is ‘unnecessary’. Fifty-two percent of homeowners responded that flood insurance was only necessary to protect coastal homes. The lack of concern for flood insurance coverage might be due to the minimal number of hurricanes making landfall in the U.S. in 2007.

“After a major hurricane (or an earthquake), there is an uptick in the purchase of these types of coverages.  Then the take-up rate starts to slow down the following year as people’s fears start to diminish.  They quickly “forget” about a hurricane,” said Loretta Worters, Vice President of the Insurance Information Institute (I.I.I.).

Data from the Federal Emergency Management Agency (FEMA) shows that flood insurance awareness has varied over the years in almost a direct correlation with some of the major hurricane landfalls in the United States. For a five year period prior to Hurricane Ivan and Hurricane Katrina’s U.S. landfall, the number of flood insurance policies would increase on average by about 1.5 percent each year.

In 2005 however, the year after Hurricane Ivan hit the Gulf Coast and eastern seaboard, the number of flood insurance policies in force rose by 6.31 percent.  More dramatically, the number of flood policies in effect went up 11.14 percent in 2006- the year following the number one flood event for NFIP payout in the history of the U.S. -- Hurricane Katrina.  Likewise, the percent increase in flood policies went back to normal in 2007 with only a 2.5 percent increase from 2006 when there were not any substantial flood damages reported.

“Many people do not realize that floods, including inland flooding, flash floods and seasonal storms, occur in every region of the United States”, said Worters. “We continually look to remind people that standard homeowners and renters insurance does not cover flood damage. Flood damage is excluded under standard homeowners policies. Only a flood insurance policy, available to homeowners and renters through the federal government, will cover flood-related losses.”

The Midwest Floods that occurred in June of 2008 were a frightening example of how flood damage can occur anywhere, without any notice. A levee burst in Gulfport Illinois covering the small town in approximately 10 feet of water. As flood waters began to recede a gruesome number surfaced --28 -- the number of property owners that were insured against their losses.
Homeowners who would like more information about purchasing flood insurance and accessing their risk should visit the NFIP’s website: http://www.floodsmart.gov/floodsmart/.


Flood policies increase after major U.S. Hurricanes make landfall
Year   Policies in force   Percent Increase
   at end of year*   
1996   3,693,076   6.22%
1997   4,102,416   11.08%
1998   4,235,138   2.24%
1999   4,329,985   2.24%
2000   4,369,087   0.90%
2001   4,458,470   2.05%
2002   4,519,799   1.38%
2003   4,565,491   1.01%
2004   4,667,446   2.23%
2005   4,962,011   6.31%
2006   5,514,895   11.14%
2007   5,653,949   2.52%

*Source: U.S. Department of Homeland Security, Federal Emergency Management Agency.
Increase in Flood Policies by Year   Hurricanes and Related Deaths by Year


Year   U.S. Landfall
Hurricanes     Total Hurricanes   Deaths **
1999   2   8   60
2000   0   8   4
2001   0   9   42
2002   1   4   5
2003   2   7   24
2004   6    9   59
2005   7   15   1,518
2006   0   5   0
2007   1   6   

**Source: Insurance Information Institute from data supplied by the U.S. Department of Commerce, National Oceanic and Atmospheric Administration and National Hurricane Center.

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