Reaching the Moonshot Goal in Flood Insurance Coverage

The private flood insurance industry made significant strides to insure more households against the peril of flood in 2018. Factor in recent major flood events and an ever-changing regulatory landscape, and the role of private flood insurance has never been more critical.

The insurance industry has its work cut out for it. The National Flood Insurance Program’s (NFIP’s) “moonshot” goal to double the amount of homes insured for flood by 2023 is a tall order, given the NFIP’s well-publicized financial position and its complex underwriting process. From the industry’s perspective, private flood insurance is key to making that moonshot a reality.

Quoting, writing and servicing an NFIP policy requires a higher level of experience and education typically associated with specialized agents, particularly for homes exposed to higher risk of flooding. This is where private flood insurance has really helped move the needle. By reducing those complexities and simplifying the experience, the private insurance markets have created a suite of flood products that every agent can quote.

Less than four years ago, private flood insurance began to make meaningful changes with respect to flood insurance innovation. At that time, most industry players had little underwriting experience in the private space due to limited production history. Today, capital markets have a deeper understanding of flood risk and the industry has developed tools that allow programs to better quantify risk. These advancements allow more people to have the flood insurance conversation.

The climate is right. For the most part, the lending industry has embraced private flood insurance. But the Federal Housing Authority and its first-time-homebuyer program continue to follow an antiquated policy that only accepts the NFIP to satisfy borrower flood insurance requirements. That may be changing. In 2019, pending rule changes propose that first-time homeowners have the option of buying private flood insurance, where previously they have not been able to.

Weather events of 2018 helped sharpen the focus of private flood programs. While several record-breaking hurricanes stole the spotlight, substantial rainfall along the East Coast for much of the spring and summer resulted in widespread flooding. We saw many claims in Texas because of the tropical moisture from the pacific cyclone that came from Mexico. There were more claims from that event in Texas than caused by Hurricanes Florence and Michael combined.

These weather events have helped to improve underwriting and risk management, creating a more responsible, sustainable marketplace.

Agent priorities and criteria have shifted as well. If you’re an insurer looking to enter this competitive environment, you need strong partners.

There’s a lot at stake. Therefore, agents are vested in finding the best and most dependable programs to protect their customers in times of greatest need.

There are tremendous resources available to help both agents and policyholders navigate the complexities of flood insurance. As a result, there’s a more informed audience looking beyond the pitch to truly evaluate the offering. Agents pressing for proof points are now in the position to ask about past performance in the face of notable events such as Hurricane Harvey or the 2016 East Baton Rouge, La., flooding.

If a private flood insurance program can’t show you how it creates both value and security for your customers, you should be skeptical.

It comes down to choice. Consumer expectations have evolved; they want options best suited for their lifestyles. More than ever, agents must have alternatives available for the picky customer.

Looking ahead, we can be optimistic about reaching the moonshot goal. The stars are aligned. The players in the homebuying universe — the homeowners, agents, realtors, lenders, the federal regulators backing these lenders, government officials and industry partners — recognize that private flood insurance brings viable options in critical protection.

Dickson is president and CEO of Aon Edge, overseeing the delivery of primary, private flood insurance products as an alternative to federally-backedflood insurance. He has more than 20 years’ experience in the insurance industry. Phone: 888-281-0684. Email: