Flood insurance has long been primarily administered by the National Flood Insurance Program (NFIP), which has 5.1 million policies in force. But the landscape for flood insurance – and who needs it – is changing. This was the topic of an AM Best webinar that included Linda Jancik, AAIS Personal Lines Product Manager, Serena Garrahan, Vice President, Inland Flood Product Manager at Munich Re US, and Rob Olson, Senior Research Analyst at International Risk Management Institute (IRMI).
One major evolution of flood insurance is where it’s needed. Yes, it’s only required in areas designated as flood zones – beaches, lakes, rivers – but with climate change, more and more floods are happening outside these designated areas. In fact, “The National Flood Insurance Program estimates that 20% of flood claims come from outside special flood hazard areas,” according to Ms. Garrahan.
Aside from climate change, another problem stems from Federal Emergency Management Authority (FEMA) maps that designate flood zones, but don’t account for newer developments. And floods remain the most frequently occurring natural disaster in the United States.
“The insurance industry not only needs to advertise the problem, including climate change and the impact, but educate consumers on the solution,” explains Ms. Jancik. “(At AAIS) we start by educating our Member (carriers) about the need and then look to provide tools to allow them to educate their customers.”
Luckily, progress has been made in modeling and big data has given carriers more confidence to enter the market. From 2019 to 2020, the market grew from 152 to 175 private insurers offering flood coverage and the opportunity remains substantial.
“The primary reason a carrier would want to offer flood coverage is the industry and carriers have access to data they haven’t had in the past,” Ms. Jancik explained. “That coupled with the increase in variant weather, consumers need for flood coverage – it is a large opportunity.”