Credit unions and members lacking flood insurance can be both literally and figuratively underwater, according to Joseph Luedke, senior consultant with CUNA Mutual Group’s corporate and legislative affairs team.
According to the Federal Emergency Management Agency, flooding is the most frequent and costliest natural disaster in the United States. Despite this fact, people outside Special Flood Hazard Areas are not protecting themselves by purchasing flood insurance.
Luedke noted that Hurricane Harvey in 2017 resulted in $17 billion in damages covered by insurance, and $40 billion in losses that were uninsured, with the average claim payment under the National Flood Insurance Program being $110,000. He explained that given 40 percent of Americans cannot cover an unexpected $400 expense, consumers are threatening their financial wellbeing. Likewise, credit unions risk facing significant mortgage charge-offs following a catastrophic natural disaster.
Leudke explained that it is not only members’ homes that can be impacted by the flooding. According to FEMA, almost 40 percent of small businesses never reopen their doors following a disaster due to the high costs associated with flood damage, with the average commercial flood claim amounting to just more than $85,000. The loss of businesses can permanently affect the revival of a community and create significant risks for credit unions making small business loans.
The good news, according to Luedke, is that as member-owned financial cooperatives, credit unions can play a unique and critical role in educating their members on these risks and help separate facts from fiction.
One common myth is that homeowners are not eligible to purchase flood insurance if they are not in a designated floodplain, according to Luedke.
Recently, FEMA announced its ambitious “Moonshot” project to double the number of properties covered by 2023. To achieve this, FEMA is reaching out to various state and federal agencies, academia, the private-sector and others with tools and resources that make it easy to communicate the crucial role insurance plays in disaster recovery.
Leudke concluded that CUNA Mutual Group, whose purpose is to “help people achieve financial security” believes the credit union industry is uniquely situated in the marketplace to help bridge the insurance gap. CUNA Mutual Group partnered with FEMA to make these “Moonshot” resources easily accessible to credit unions to share with their members.
To learn more, visit CUNA Mutual Group’s website.
Joseph Luedke is a senior consultant with CUNA Mutual Group’s Corporate and Legislative Affairs Team. He can be contacted at email@example.com.