Flood – Do you have coverage?

A flash flood occurred in Fort Lauderdale, Florida, with over twenty-four inches of rain falling within 24 hours, and the surrounding areas on April 12th -13th, 2023. People in South Florida are dealing with the aftermath of a record-breaking storm that damaged critical infrastructure, flooded homes, and vehicles, and shut down the city’s airport. 

Losses from historic atmospheric river storms hit California this year too, and are estimated to be between $5 billion & $7 billion, according to Moody’s Risk Management Solutions (RMS), global catastrophe risk modeling and solutions company. Insured losses are anticipated between $500 million & $1.5 billion, including losses covered by National Flood Insurance Program (NFIP) and the private flood market. 

Only2% of California homeowners were covered by flood insurancewhen storms hit, according to Neptune Flood, illustrating the flood insurance coverage gap. 

Media coverage of this natural disaster and $132 billion insured losses relating to natural disasters in 2022 highlighted the need for flood insurance coverage for homeowners and businesses—wherever the locations. There are considerable changes in the frequency and severity of flooding events, opportunities for continued evolution of the flood insurance market, and the sustained education of consumers about flood insurance. 

Agent engagement and knowledge when selling flood insurance is crucial,ensuring clients understand their options in flood insuranceand assisting them as they navigate the market. Agencies should follow their processes and procedures, documenting and offering a flood quote to every client & prospect as part of the agency’s best practice guidelines. 

 In the U.S., flooding is the most common and costly natural disaster, with billions in losses each year. The National Flood Insurance Program (NFIP) states 90 percent of all-natural disasters in the United States involve flooding. 

Changes in Flood Market Are Raising Awareness of Insurance Options 

“For every unprecedented flooding event that is picked up by the media, we see some additional interest from people in finding out whether or not flood insurance is available to them and what the price is,” says James Watje, senior vice president of private flood at Wright National Flood Insurance Services. 

“For every one of these flooding events, we see a very small percentage of property owners—no more than 20% max—with damage which have flood insurance,” Watje says. “Ultimately, those people have a way to get back to where they were before the loss from a financial perspective. The majority do not.” 

While 75% of homeowners across the U.S. believe they have flood insurance, the actual percentage is less than 5%, according to Neptune Flood’s third Annual Consumer Survey of Flood Awareness. And with over 25% of events occurring outside designated high-frequency flood zones, flood exposure represents the largest segment of underinsured and uninsured risk within the U.S.  

One year after implementing Risk Rating 2.0, FEMA’s new pricing methodology has impacted the flood insurance market in several ways. 

“With Risk Rating 2.0 in place, properties previously rated in non-hazardous flood zones (B, C, and X) close to a water source may be rated higher now than legacy prices,” says Cassie Masone, vice president of flood operations, Selective Insurance. “Unlike in the past, Risk Rating 2.0 rates these properties based on exposure, not the flood zone,” Masone says. “Risk Rating 2.0 has also brought a property’s replacement cost into focus, which is now a required rating element.” 

Changes to the NFIP rating structure brought flood insurance—public and private—into the spotlight. “With Risk Rating 2.0 and rates changing, it creates an awareness and interest by the general public in alternatives,” Watje says. “We’re seeing more property owners and consumers ask questions, such as whether private flood insurance is available to them and its cost, which provides consumers with the understanding of what protection is available and how they can access it.” 

 Meanwhile, “many factors, including global warming, sea-level rise, storm surge, king tides, land erosion, and unprecedented record rainfall, increase the risk of flooding for many coastal and even non-coastal areas,” says Wes Brum, account executive, Insurance Associates Inc. “These factors, as well as the increase in urbanization, have impacted the rate and risk of flooding.” 

Independent agents are crucialin ensuring clients understand the options available in the flood insurance market, encouraging clients to purchase flood coverage, and assisting clients as they navigate the market. “There is a wide spectrum of agent engagement and knowledge when it comes to selling flood insurance,” says Ginny Pierson, head of the national Big “I” Flood program. 

“On one end is the agent who has a deeply ingrained procedure for offering flood to every client and prospect, who is facile with the new risk rating process and has FEMA on speed dial,” Pierson explains. “On the other is an agent who has never sold a single flood policy.” 

To improve their knowledge, “a rookie flood agent can connect with their dedicated Selective territory manager and truly learn the ropes of flood, access education and training, and get a great process in place for protecting clients,” she adds. Floods will continue to occur, and U.S. homeowners must be aware of their options. 

“Risk Rating 2.0 has created a significant marketing event—whether or not an individual property is experiencing a substantial increase, headlines and general perception of Risk Rating 2.0 is such that more and more insureds and their agents are interested in considering alternatives in the private market than they have in the past, which is healthy for the industry and helps us experience some competition,” says John Hannah, assistant vice president, lending and insurance solutions, SWBC. 

The frequency and severity of flooding events and opportunities are considerable for continued evolution of the flood insurance market. 

Three Ways Agents Can Help Clients Understand Flood Insurance Coverage 

1) Integrate flood into every conversation 

Flooding is the single most common peril properties face, according to FEMA, and it’s also the most costly. Yet, many clients are unaware that they need flood insurance or, if they are aware, how they can purchase coverage. 

2) Understand coverages available in your flood insurance market 

Risk Rating 2.0 has changed how the NFIP is pricing flood policies, so any agent looking to write an NFIP policy must understand the new rating guidelines associated with Risk Rating 2.0,” Masone says. “They should be looking to their Write-Your-Own carrier for support to ensure they obtain all of the new rating elements required to get an accurate price.” 

3) Explain how tech is improving the experience  

Technologies, including artificial intelligence (A.I.) and 3D property data, are becoming dominant features in the underwriting process. Speed & efficiency are key to supporting the underwriting process, and A.I. is emerging as the game-changing technology of the insurance sector. The use of drones to create aerial images of risk areas can help carriers and agents identify and manage risks.  

These are ways agents can demonstrate knowledge about their clients’ risks and educate them on why they should purchase flood insurance coverage! 


Cited Resource 

April 10, 2023, Changes in the Flood Market Are Raising Awareness of Insurance Options 

Olivia Overman is I.A. content editor. 


Cited Resource 

April 17, 20233 Ways Agents Can Help Clients Understand Flood Insurance Coverage 




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