Ethics and the Insurance Industry
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Ethics and the insurance industry

Ethics and the Insurance Industry

  • 100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

  • The webinar will begin shortly.

  • There is no audio at this time.

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  • The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.

  • The PowerPoint presentation is also available under ‘Materials’.

  • You will receive the course number for your state near the end of class.

  • Use the ‘chat’ window for questions on the content.

Background on flood insurance

Background on Flood Insurance

Today’s Instructor:

Casey Roberts, President

Laurus Insurance Consulting

Http www floodsmart gov floodsmart pages media resources stats jsp

  • Floods are the #1 most common natural disaster in the United States.

  • Over the past 10 years (2001-2010) the average flood insurance claim paid in the US was nearly $48,000 per year.

  • Over the past 10 years (2001-2010), flood insurance claims averaged just over $2.6 billion.

Http www floodsmart gov floodsmart pages media resources stats jsp1

  • The average flood insurance policy is about $600 per year.

  • People outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding.

  • The NFIP paid $709 million in flood insurance claims to homeowners, business owners, and renters in 2010

Facts for you and your customer

Facts For You And Your Customer

  • Floods and flash floods happen in all 50 states

    • Everyone lives in a flood zone

    • Flash floods often bring walls of water 10 to 20 feet high

  • Just an inch of water can cause costly damage

  • Each homeowners has a 26% chance of being damaged by a flood during the course of a 30-year mortgage, compared to a 9% chance of fire.

Flood facts

Flood Facts

  • If home is in a Special Flood Hazard Area (SFHA) or high-risk area and have a Federally backed mortgage, the mortgage lender requires you to have flood insurance

Ethics and the insurance industry


Vender (NFS, IMSG, ETC)





How to access coverage

How To Access Coverage

Nfip legislation


  • National Flood Insurance Act Of 1968

  • Flood Disaster Protection Act Of 1973

  • National Flood Insurance Reform Act Of 1994

Flood facts1


  • NFIP program is self-funded

  • 5 million policies in force countrywide

  • $1 Trillion in insurance coverage

  • 70-80% of all natural disasters are flood related

Myths about the nfip

Myths about the NFIP

  • You can’t buy flood insurance if you are located in a high-flood risk area.

  • You can’t buy flood insurance immediately before or during a flood.

  • Homeowner’s policies cover flooding.

Myths about the nfip1

Myths about the NFIP

  • You can’t buy flood insurance if your property has flooded.

  • Only residents of high-risk flood zones need to insure their property.


  • Federal disaster assistance will pay for flood damage.

Flood policy verses disaster assistance

Flood Policy verses Disaster Assistance

Flood Insurance

  • Policyholder

  • Contractual basis for claims

  • High policy limits

  • Policy to pay claim

  • Victim

Disaster Assistance

  • Application for aid

  • Lower limits

  • Disaster must be declared by the President

  • If eligible - loan or grant

Why is flood insurance needed

Why is Flood Insurance Needed?

Policy exclusions

Policy Exclusions

  • Flood is a catastrophic exposure,

  • Standard Commercial Property, Business Income, Homeowner’s, Renters and Condo policies exclude flood,

  • A few non-standard policies, such as HPR and High-Value Homeowner’s include flood, but that is the exception rather than the rule,

Ho 00 03 flood exclusion

HO 00 03 Flood Exclusion

3. Water Damage

Water Damage means:

a. Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind;

b. Water or water-borne material which backs

up through sewers or drains or which overflows or is discharged from a sump, sump pump or related equipment; or

Ho 00 03 flood exclusion1

HO 00 03 Flood Exclusion

c. Water or water-borne material below the

surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure;

caused by or resulting from human or animal forces or any act of nature.

Direct loss by fire, explosion or theft resulting from water damage is covered.

How the nfip operates

How the NFIP Operates

Community participation

Community Participation

  • How does a community participate?

    • Submit application to FEMA

    • Meet minimum floodplain management requirements

  • What does non-participating mean?

    • No flood insurance available

    • No disaster assistance

    • No federal mortgage assistance in SFHA

What is a community

What is a Community?

  • Any political subdivision or entity that has the authority to adopt & enforce floodplain ordinances.

  • Such as: Towns, Cities, Counties & Tribes



Non participating communities

Non-Participating Communities

Nfip programs emergency and regular programs

NFIP ProgramsEmergency and Regular Programs

Two programs

Two Programs

Amount of insurance available emergency program

Amount Of Insurance Available – Emergency Program

Program phases regular

Full Participation

Actuarial Rates

Higher Limits Available

Flood Insurance Rate Map (FIRM)


Amount of insurance available regular program

Amount Of Insurance Available – Regular Program

Community rating system

Community Rating System

  • Provides incentive for doing activities above the minimum requirements

  • To promote awareness of flood insurance

  • Recognition in the form of discounts –

    from 5% to 45%

Community probation

Community Probation

  • Non-compliance means $50 surcharge on all new and renewal policies

  • Probation lasts for 1 year

Community suspension

Community Suspension

  • No new or renewal policies

  • No federal mortgage assistance in SFHA

  • No disaster assistance in SFHA

Underwriting information needed maps and zones

Underwriting Information NeededMaps and Zones

Community status list how to obtain

Community Status ListHow to Obtain

  • status book


  • Map Service Center





Built prior to 12/31/1974 or before the effective date of the initial FIRM for the community whichever is later


Built on or after the effective date of the initial FIRM for the community

Flood zones special flood hazard areas

Flood ZonesSpecial Flood Hazard Areas

  • Zones beginning with A or V

  • A, A1-A-30, AE, AO, AH, A99, AR

  • V, V1-V-30, VE

  • Mandatory purchase applies

  • New maps will show A1-A30 as AE and V1-V-30 as VE

Flood zones minimal to moderate flood hazard areas

Flood ZonesMinimal to Moderate Flood Hazard Areas

  • B, C or X

  • 25-30% of NFIP Claims come from these areas

  • New maps will show B or C as an X

Base flood

Base Flood

  • Common engineering standards

  • NFIP adopted baseline probability

  • 1% chance flood

  • One out of 100 chance of occurring in any given year (100 year flood)

Flood zone determinations

Flood Zone Determinations

  • Flood Insurance Rate Map

  • Zone Determination Company

  • Lender - Standard Flood Hazard Determination Form

Base flood elevation bfe

Base Flood Elevation (BFE)

  • The computed elevation in which floodwaters are anticipated to rise during the base flood.

  • Not a measure of time

Identifying flood prone areas

Identifying Flood Prone Areas

  • National Flood Insurance Act of 1968 directed FEMA to:

  • Identify all flood prone areas within the US

  • Establish flood-risk zones within flood prone areas

Special flood hazard area

Special Flood Hazard Area

  • Land area which is covered by floodwaters from the Base Flood

  • SFHA area where Floodplain Management Regulations must be enforced by the community

  • Mandatory flood insurance purchase requirement

  • Zones Beginning with “A” or “V”

Ethics and the insurance industry










PANEL 0001 OF 0004






060001 001 C


MAY 16, 1994

Federal Emergency Management Agency


060001 0001-0004


JUNE 5, 1996

Federal Emergency Management Agency

Ethics and the insurance industry

Basic Elements of Flood Maps: The Panel

Ethics and the insurance industry

Sample Map Index





General Area

of Property

Ethics and the insurance industry

FIRM Panel 0001C - General Location

Sutter Blvd.

Fort Ross Ave.


Monterey Ave.








Vallejo Ave.

Sonoma Ave.

Green River







Fremont St.


Larkin St.

Bidwell St.




Alvarado Ave.



Coastal barrier resources system

Coastal Barrier Resources System

The CBRS is a system of protected coastal areas that includes ocean-front land, the Great Lakes and Other Protected Areas.

These barriers serve as important buffers between coastal storms and inland areas, often protecting properties from flood damage.

Structures built after 10/1/1983 are not insurable.

Letters of map change

Letters Of Map Change

  • Letter of Map Amendment (LOMA)

  • Letter of Map Revision (LOMR)

  • If eligible, structure removed from SFHA, mandatory purchase requirement lifted subject to lender approval

Map changes

Map Changes

  • Letter of Map Amendment (LOMA)

    To Correct Errors in Mapping

    • Adjacent grade higher than BFE

Map changes1

Map Changes

  • Letter of Map Revision (LOMR)

    • To revise the map as a result a change

      • Flood control project

    • Elevation above the BFE based on fill

Letters of map change1

Letters Of Map Change

  • 1-877-336-2627


  • Mandatory Purchase Requirement Removed Subject to Lenders Approval

Map grandfathering rule

Map Grandfathering Rule

  • For Rating Purposes Only

Map grandfathering rule1

Map Grandfathering Rule

  • Pre-firm:Buy before effective date of the new map

  • Post-firm:Option to buy before or after effective date of new map

    • Must show structure was built in compliance at the time it was constructed

Flood requirements

Flood Requirements

Flood insurance required

Flood Insurance Required

  • Must Cover The Lesser Of:

  • The Loan Amount (less land)

  • The Maximum Limit of Coverage Available

  • The Replacement Cost of the Structure

Residential example

Residential Example

  • Loan Amount: $800,000

  • Structure Value:$500,000

  • Land Value:$300,000

  • What is the minimum required?

Residential example1

Residential Example


Commercial example

Commercial Example

  • Loan Amount: $2,000,000

  • Structure Value:$ 800,000

  • Land Value:$1,200,000

  • What is the minimum required?

Commercial example1

Commercial Example


Condominium example

Condominium Example

  • Loan Amount: $1,000,000

  • 1 Bldg w/ 4 units Value:$ 800,000

  • Land Value:$ 200,000

  • Hint: Replacement Cost or the number of units x $250,000. Whichever is less

  • What is the minimum required?

Condominium example1

Condominium Example


Acceptable proof of insurance at closing

Acceptable Proof Of Insurance At Closing

  • New Policy:

    • Copy of NFIP/WYO flood insurance application plus receipt of payment

  • Assigned Policy:

    • Copy of general change endorsement

    • Copy of Declarations Page of previous owner

Flood defined and coverage

Flood Defined and Coverage

What is a flood

What is a Flood?

1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:

  • A) Overflow of inland or tidal waters

  • B) Unusual and rapid accumulation or runoff of surface waters from any source

  • C) Mudflow



  • A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water.

  • Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.

Ethics and the insurance industry

Rio Linda, CA Mudslide

What is a flood1

What is a Flood?

#2. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in A.1.a

Seepage sewer backup

Seepage & Sewer Backup

  • Now only covered if there is a general condition of flooding in the area

  • Flood proximate cause

Property covered coverage a building

Property Covered—Coverage A Building

  • Five Additions and Extensions

    • Rigid Exterior Wall

    • Solid Load Bearing Wall

    • Stairway

    • Elevated Walkway

    • Roof

Standard flood policies

Standard Flood Policies

Standard flood policies1

Standard Flood Policies

  • Each Building Must Be Insured On A Separate Policy.

  • Separate Deductible for Building & Contents

  • No Blanket Coverage

Standard flood policies2

Standard Flood Policies

  • Dwelling Policy

  • General Property Policy

  • Residential Condominium Building Association Policy

  • Preferred Risk Policy

  • Mortgage Portfolio Protection Policy

Dwelling policy

Dwelling Policy

  • Residential building 1-4 family

  • Single Family dwelling unit in a condo building

  • Provides: Replacement Cost on Building and Actual Cash Value on Contents

Dwelling policy1

Dwelling Policy

  • Replacement Cost Provisions:

  • - 80% replacement cost insured or the maximum available under the NFIP

  • - Single Family

  • - Principal residence - must live there 80% of the year.

  • Manufacture home - 16ft wide and 600 square feet

Building definition

Building Definition

  • A structure with two or more outside rigid walls and fully secured roof, that is affixed to a permanent site;

  • A manufactured home ( a “manufactured home,” also known as a mobile home, is a structure: built on a permanent chassis, transported to its site in one or more sections, and affixed to a permanent foundation);

Building definition1

Building Definition

  • A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community’s floodplain management and building ordinances or laws

Building definition2

Building Definition

  • Buildings do not mean a gas or liquid storage tank or a recreation vehicle, park trailer or similar vehicle, except as described above

Lll property covered 2

lll. Property Covered #2

Common wall rules iii property covered 2

Common Wall RulesIII. Property Covered #2

  • Additions and extensions attached to and in contact with thedwellingby means of a rigid exterior wall ,a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof may be separately insured.

Ethics and the insurance industry

Common Wall

General property policy

General Property Policy

  • Other Residential

  • Non Residential - Commercial

  • Contents Only Policies

  • Actual Cash Value on Building & Contents

Preferred risk policy

Preferred Risk Policy

  • One-to-four family dwellings

  • Zones B, C and X only

  • Pre-packaged coverage combinations

  • Loss eligibility requirements

  • $1000 Standard Deductible

  • No rating necessary

  • Easy to complete application

Residential condominium building association policy

Residential Condominium Building Association Policy

  • Covers the common elements & all structural items of the units within a building.

  • Covers contents in common

  • Replacement Cost on Building - subject to replacement cost provisions

  • ACV on Contents

Iii property covered a coverage a building coverage page a 5

III. Property CoveredA. Coverage A – Building CoveragePage A-5

  • Key points of A. 1. Thru A. 8

Property coverage

Property Coverage

  • Coverage A Building Property #3

  • Detached Garages and Carports

    • No Coverage for carports

    • Coverage for detached garages

Dwelling and general property buildings under construction

Dwelling and General PropertyBuildings Under Construction

  • Insurable as long as construction is actively ongoing

  • If construction ceases or is interrupted for more than 90 continuous days coverage also ceases.

  • Walled and roofed

  • Work in progress

  • Lowest floor below BFE in SFHA

Iii property covered a coverage a building page a 6 dwelling policy form


#7. Reads : The following fixtures, machinery, and equipment, which are covered under Coverage A only:

A) Awnings & canopies

B) Blinds

C) Built-in dishwashers

D) Built-in microwaves

E) Carpet permanently installed over unfinished flooring

F) Central air conditioners

G) Elevator equipment

H) Fire sprinkler systems

Property covered coverage a building property

Property CoveredCoverage A Building Property

  • Walk in freezers

  • Furnaces and radiators

  • Garbage disposal units

  • Hot water heaters, including solar water heaters

  • Light fixtures

  • Outdoor antennas & aerials fasted to bldgs

  • Permanently installed cupboards, bookcases, cabinets, paneling and wallpaper

  • Plumbing fixtures

Property covered coverage a building property1

Property CoveredCoverage A Building Property

  • Pumps and machinery for operating pumps

  • Ranges, cooking stoves and ovens

  • Refrigerators

  • Wall mirrors, permanently installed.

Coverage a building property item 8

Coverage A. Building PropertyItem #8


  • Basements

  • Post Firm Elevated Buildings in SFHA

Definition of a basement

Definition of a Basement

  • Any area of the building including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.

Basements property covered

Basements - Property Covered

  • Any of the following items if installed in their functioning locations:

  • Central Air conditioners

  • Cisterns & the water in them

  • Unfinished Dry wall for walls & ceilings

  • Electrical junction & circuit breaker boxes

  • Electrical outlet & switches

Basements property covered1

Basements - Property Covered

  • Elevators, dumbwaiters & related equipment- except if installed: below the BFE after Sept. 30, 1987

  • Fuel Tanks & the fuel in them

  • Furnaces & hot water heaters

  • Heat pumps

  • Nonflammable insulation

  • Pumps & tanks used in solar energy systems

Basements property covered2

Basements - Property Covered

  • Stairways & staircases attached to the building (not separated from it by an elevated walkway)

  • Sump Pumps

  • Water softeners & the chemicals in them

  • Well water tanks

  • Required utility connections

  • Footings, foundations, posts, pilings, piers or other foundation walls & anchorage systems required to support a building

Basements elements not covered

Basements Elements Not Covered

  • Contents

  • Improvements such as finished walls, floors & ceilings

  • Building equipment & fixtures not specifically covered

  • Elevators relevant equipment installed after Sept. 30, 1987, if located below the BFE

B coverage b personal property items 1 thru 7

B. Coverage B. Personal Property (Items #1 thru #7)


    • Owned by you or your household family members

    • Owned by guests or servants

    • In enclosed building on property

    • At temporary authorized location -45 days- *$1,000. limit

B coverage b personal property items 1 thru 71

B. Coverage B. Personal Property (Items #1 thru #7)

  • Item #4

  • 10% of Personal Property Limit for improvements

  • Item #5

  • No more than 10% for interior walls, floor and ceilings (not otherwise covered)

Coverage c other coverages items 1 3

Coverage C. Other CoveragesItems #1 - #3

#1. Debris Removal

  • Draws from building limit

  • Of, on or from insured property

  • Non-owned debris removal from insured premises

  • Insured property anywhere

  • You or your family members reimbursed for time computed at Federal Minimum wage.

Coverage c other coverages

Coverage C – Other Coverages

#2. Sand Bag Coverage:

  • $1,000 Limit (does not draw from bldg. limit)

  • Sandbags

  • Sand

  • Wood

  • No Deductible

Deductibles fees

Deductibles & Fees

  • Deductibles

  • $1,000. standard Deductible *Pre-Firm in SFHA *Emergency Program

  • Optional Higher Deductibles available

  • Applies separately to Bldg. & Contents

  • Fees

  • Expense Constant $50.00 Annually

  • Federal Policy Fee $30.00 Annually

  • ICC Mandatory Endorsement $4.00 to $75.00

Increased cost of compliance endorsement icc

Increased Cost of Compliance Endorsement (ICC)

  • $30,000. Limit separate from Coverage A

    • No separate deductible

    • For elevation, flood proofing, relocation & demolition

    • Mandatory charge for Pre-Firm/Post Firm

    • Not available on Emergency Program

Ethics and the insurance industry

New Elevation CertificateAs January 1, 2007 all new EC must be submitted on this new form and must include to photographs these EC expire in 2012

The elevation certificate

The Elevation Certificate

  • Its Role in Mitigation

  • Its Role in Policy Rating

  • Its Role in Map Revisions and Amendments

Section a building diagrams

Section A – Building Diagrams

Non elevated buildings

Non Elevated Buildings

Breakaway wall

Breakaway Wall

  • Is Not Part of the Structural Support of the Building

  • Designed to Collapse Under Specific Lateral Loading Forces without Causing Damage to the Elevated Portion of the Building or Foundation System



  • That Portion of an Elevated Building Below the Lowest Elevated Floor that is Either Partially or Fully Shut-in by Rigid Walls

Reasons to market flood insurance

Reasons to Market Flood Insurance

Reasons to market flood

Reasons to Market Flood

  • Errors & Omissions Protection

  • Increase commissions

  • Help retain accounts

  • Helps develop new accounts

Insured s responsibility

Insured’s Responsibility

  • File Notice of Loss

    • Immediate Written Notice

  • Exhibit all remains of the property

  • If requested, submit an examination under oath

  • Provide evidence and documentation to substantiate the loss

  • File a Proof of Loss within 60 days

    • Unless waved by FEMA

  • Adjusters do not have the ability to approve or deny a claim. Recommendation for payment or denial are not binding & subject to approval

Single adjustor program

Single Adjustor Program

  • FEMA & Various Coastal Plans will determine if necessary

  • 48 Hours from landfall FEMA will initiate SAP response

  • Adjusters will be deployed to strategic areas

  • No later than 24 hours after landfall the WYO will be advised of their SAP liaison

  • WYO Companies will advise agents to involve both wind and flood to the State Coastal Plans (Windpool, Fairplan, Beachplan)

Single adjustor program1

Single Adjustor Program

  • NFIP will notify all SAP Liaisons of the Claims Coordination Office(CCO)

  • CCO will notified the WYO of all assigned claims

  • WYO Company will manage its own loss adjustment, but CCO will ensure adjuster receives a copy of the loss assignments.

Ethics and the insurance industry

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