Flood Insurance Customers’ Satisfaction Dips

In the wake of Irene’s flooding and increased squabbling over the National Flood Insurance Program (NFIP), personal lines insurance policyholders (homeowners) that have flood insurance are found to be less satisfied with their policy coverage compared with policyholders who opt not to carry it, according to the J.D. Power and Associates 2011 U.S. National Homeowners Insurance Study. The study, J.D. Power's 11th, measures customer satisfaction with homeowners insurance companies by examining five key factors: policy offerings; price; billing and payment; interaction; and claims.

The study shows that less than one in 10 homeowners insurance customers in New England and the Mid-Atlantic reported carrying flood insurance prior to Hurricane Irene. While a higher proportion of policyholders in the Gulf states—more than 25 percent—carry flood coverage either through their homeowners insurance company, state flood plans or another provider, this is still a relatively low proportion, considering the frequency of hurricanes and other severe weather events in the region.

Yet to be voted on in the Senate, H.R. 1309, the Flood Insurance Reform Act of 2011 passed the House of Representatives by a vote of 406 to 22 in July. The NFIP, which currently provides flood coverage for some 5.6 million Americans, may run out of money on Sept. 30, note reports. The reform act is designed to extend the National Flood Insurance Program for five years and phase in more accurate risk-based pricing as well as a Technical Mapping Advisory Council to more accurately define flood plains.

However, those homeowners who do carry flood insurance report an average of 735 on a 1,000-point scale in terms of overall satisfaction with their homeowners’ insurance company averages. In comparison, satisfaction among homeowners with earthquake insurance coverage averages 766, according to the study.

Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, points to 2011 as being a tough year for the property insurance industry due to the occurrence of multiple natural catastrophes, such as tornadoes in the southern U.S. in the spring, massive flooding in the Midwest, the recent earthquake on the East Coast, and Hurricane Irene.

“It’s driven home the necessity among many U.S. consumers of having adequate homeowners insurance coverage,” said Bowler.

According to Bowler, it’s critical for homeowners to keep track of their insurance coverage, making sure it’s sufficient before a disaster strikes, not afterwards.

“Unfortunately, the majority of homeowners affected by Hurricane Irene were not covered for flood damage, and many may find their claims denied,” said Bowler.

While many homeowners may not give much thought to their insurance under normal circumstances, the moment they have to file a claim, the value of coverage becomes realized. The study finds that customers who have filed a claim tend to be more knowledgeable about their policies—and also more satisfied—than those who haven’t had a claims experience.

Apart from claims processing and adequate coverage, however, overall customer satisfaction with homeowners insurance companies rebounded from 2010, but still remains below levels achieved in 2009, notes the J.D. Power study. Satisfaction with homeowners insurance companies averages 769 in 2011—improving by 19 points from 2010. While satisfaction has improved in all five factors from 2010, the greatest gain occurs in the interaction factor. Despite these gains, customer satisfaction with homeowners insurance companies remains significantly below satisfaction with auto insurance companies, which averages 790 in 2011, according to the J.D. Power and Associates National Auto Insurance Study, published in June.

Of the insurers rated by the study, Amica Mutual ranked highest for a 10th consecutive year, performing well in all five factors that contribute to overall customer satisfaction. Following Amica Mutual in the rankings are Auto-Owners Insurance and Erie Insurance (in a tie), Cincinnati Insurance, State Farm, and American Family, respectively. USAA, an insurance provider open only to U.S. military personnel and their families and therefore not included in the rankings, also achieves a high level of customer satisfaction.