Private Flood Insurance Growth Creates Opportunities For Claims Professionals

A nudge into the market by carriers offering private flood insurance is becoming more of a shove, which might bring new opportunities for claims adjusters and maybe create a more efficient claims process along the way.

An executive for Munich Re said that the number of property owners who choose to add its white label flood risk endorsement to their insurance policies has doubled in the past year.

What’s more, the chief executive officer of Poulton Associates — a managing general agent that sells private alternatives to the National Flood Insurance Program — said his firm will soon launch a new program that will allow insurance agents to quote the cost for additional flood coverage for every policy in their book of business.

These developments come after a documented increase in the premiums collected for private flood insurance, which the National Association of Insurance Commissioners started tracking as a separate data point in 2016. NAIC data shows that insurers reported direct written premium of $644 million in 2018, up from $376 million in 2016.

Those figures don’t include flood insurance that is written as a surplus line, which the Wholesale Specialty & Insurance Association estimated to be $398 million in 2017, according to a report by Carrier Management.

The approximately $1 billion in written premium for private flood insurance compares to $2.85 billion in direct premium for federal flood insurance reported to NAIC in 2018.

Florida removed one hurdle for private flood insurance by adopting rules that create a process for carriers to certify that their coverage is equivalent to policies sold in the federal program, which satisfies lender requirements. New federal rules that took effect on July 1 will remove another hurdle nationwide by requiring lenders to accept private flood insurance deemed equivalent to insurance sold under the federal program.

Data from Florida, which accounts for 35% the federal flood insurance policies in the U.S., shows that sales of private flood insurance have been rising quickly. The number of personal residential private flood insurance policies in force increased 42% in just six months, to 62,933 polices on March 31 from 44,252 on Sept. 1, 2018, according to the state Office of Insurance Regulation.

Momentum

Poulton Associates CEO Craig Poulton said public awareness has been raised by events such as Hurricane Harvey, where an estimated 70% of losses were not covered by insurance, and a 2016 flood in Louisiana that wasn’t associated with any named storm. But he said more importantly, insurance brokers are recognizing that flood insurance isn’t necessarily a stand-alone product and are starting to understand that there is demand for the coverage.

“I think it’s just a momentum thing,” Poulton said. “There’s this domino effect. The product is available and it will help you sell policies. The early adopters start preaching that and pretty soon the guy across the street learns that he better do the same thing.”

That momentum prompted Poulton’s company to work with an insurtech partner to design a software program that provides flood insurance quotes for entire books of business. Poulton said in testing, his company and its tech partner were able to quote flood insurance for a book of business with more than 100,000 personal lines policies. The program hooks up through an application program interface (API) with IVANS, a proprietary system used to exchange information between insurance carriers and agents.