NC Insurers Warned About Using Flood Denials in Underwriting

North Carolina Insurance Commissioner Mike Causey is reminding property insurers to refrain from raising homeowners’ premiums just because an insured filed a claim or inquiry in order to qualify for flood insurance indemnity or federal assistance.

In most cases, the National Flood Insurance Program and the Federal Emergency Management Agency requires policyholders to obtain a denial from their property insurance carrier before making a flood claim to NFIP or qualifying for FEMA aid. And a North Carolina statute forbids property insurers from penalizing insureds for filing those claims by canceling coverage, refusing to renew, or raising premiums, Causey said in a bulletin posted Friday.

“We ask insurers to recognize these requests as FEMA-eligibility verification requirements rather than as claims activity,” the bulletin reads. “We would encourage insurers to ensure that your … claims representatives be proactive in asking questions to ensure that the inquiries are related to Hurricane Helene.”

Most homeowners’ policies do not cover flood damage. Thousands of properties in western North Carolina were hit hard by river flooding from torrential rains brought by Hurricane Helene in late September. For those properties that did not purchase flood insurance, some assistance from the Federal Emergency Management Agency may be available.

“FEMA’s Individuals and Households Program (IHP) provides financial assistance to eligible individuals and households impacted by disasters,” Causey’s bulletin explains. “To qualify for IHP assistance, FEMA often requires a letter from the policyholder’s homeowners insurance carrier verifying that the loss is not covered under their existing policy. This letter enables a consumer to access critical disaster recovery funds.”

That letter should not be used in underwriting analysis for the property, the commissioner noted.

Meanwhile, paying for NFIP coverage will soon become a little easier. FEMA announced Monday that it will allow an option for policyholders to pay flood insurance premiums monthly, instead of an annual basis. Read more here.

FEMA did not give a start date for the new installment plan, but news reports have indicated it should be available by early 2025. A rule approved last week will be entered into the Federal Register, removing regulatory barriers to an installment option, FEMA said. The agency and insurance providers will offer more information as it becomes available.

“Once FEMA is certain that all the conditions are in place to provide policyholders with a safe, secure and seamless process to pay by monthly installments, agents and NFIP insurers will offer the installment plan option to new policyholders at the time of application and existing policyholders at the time of renewal,” FEMA said in a statement. “At that time, to be eligible to participate in a monthly installment payment plan, policyholders will need to opt in to authorize automatic, electronic payments (e.g., via a credit card or bank account) through their insurer.”

To reduce administrative burden and additional costs to policyholders, monthly installment plan communications and payments will be entirely electronic, the agency noted.

Photo: A search-and-rescue team member inspects a building in the aftermath of Hurricane Helene in Bat Cave, North Carolina, on Oct. 1.

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