Consumers seldom think about auto and homeowners insurance until the unthinkable happens and they need to file a claim.
However, with increasing frequency, Mother Nature is bringing widespread devastation to the U.S.
So far, this is proving to be another damaging year. CoreLogic, a property information services company, estimates Hurricane Florence will cause wind and flood losses between $20 billion and $30 billion while early estimates project Hurricane Michael will cause between $15 billion to $21 billion in damages. Tragically, a majority of the families and communities hit by Florence and Michael were uninsured and will face additional challenges recovering from the devastation because of the gap in their insurance protection.
Even with insurers paying out record sums and playing an instrumental role in the recovery process, the Geneva Association found that the U.S. has more uninsured exposure than any other country.
The numbers tell the story. Upwards of 80 percent to 85 percent of the homes and businesses hit by Hurricanes Florence and Michael did not have flood insurance.
The insurance gap associated with earthquake insurance is also glaring, with 90 percent of homeowners and businesses in California lacking basic earthquake protections. States from Alaska to Maine face the threat of earthquake. However, too many Americans across the country don’t fully understand their risk nor the need for earthquake insurance.
Renters are not exempt from natural disasters, and those who don’t have insurance can face financial challenges as they try to replace their belongings. Without renters insurance, an individual assistance grant from the Federal Emergency Management Agency may be their only option.
Drivers are not exempt from the insurance gap. A 2017 study by the Insurance Research Council reported that roughly one-in-eight drivers is uninsured.
Responsible drivers that follow mandatory liability insurance laws pay the price for other drivers that make the conscious choice to drive without insurance and are sometimes left with no protection after an accident.
Now that the insurance gap has been identified, the question becomes what can we do about it? Consumers, businesses, public policy leaders and the insurance industry can all play a role in bridging the insurance gap.
The most urgent need is for Congress to reauthorize the National Flood Insurance Program, which is set to expire again on Nov. 30. Enacting a long-term bill with reforms that expand consumers’ flood insurance options will provide consumers with more choice and stability.
Policymakers and insurers should continue working together to bring more flood insurance options to the marketplace.
Private sector participation in the flood insurance market could increase options and lower costs.
The industry should work to better educate consumers about the insurance gap and what coverage is needed. Agents are on the front lines of financial literacy and are in an key position to send a wake-up call for consumers to financially prepare.
Insurers are also working with regulators and policyholders on new products and solutions for underserved markets, such innovative coverages for cyber exposure, autonomous vehicles and the gig economy.
Insurers are also working with policymakers and communities on improving land use policies and building standards to improve disaster resiliency.
Insurance is the critical safety net that helps individuals and communities rebound from catastrophes to small auto accidents.
Now is the time to bridge the insurance gap so the nation is prepared for everything from disasters to the mishaps on our congested roads.
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