One of the major reasons an individual chooses to go uninsured against a particular peril is a lack of trust in insurers. That’s a problem when global survey evidence shows consumer confidence in the industry is lower than that of banks and retailers, and high-profile incidents of claims disputes push it still lower.
And it’s particularly concerning in the Northeast, where new evidence suggests hurricanes could start flooding the New York coastline as often as every 20 years.
The report, released earlier in the month, found that water could surge about nine feet in these hurricanes, which would occur between three and 17 times more often than today.
It’s a powerful incentive for Northeast residents to purchase flood insurance, but ongoing anger toward the insurance industry’s handling of claims after 2012’s Hurricane Sandy may have poisoned the waters. Evidence that emerged earlier this year suggests private insurers earned up to $406 million annually by administering flood policies in the wake of Sandy, during which complaints over claims handling were high.
A series of allegations suggested engineering reports were altered to exclude flooding as the cause of loss following the storm, driving up fees insurers could charge for the service and leaving consumers with an extensive payout process that was the focus of many bitter congressional debates.
But does it follow that anger and distrust toward insurance companies will prevent Northeast residents from purchasing insurance against the rising sea levels?
Not necessarily, says
Swiss Re Chief Property Underwriter Monica Ningen.
“I don’t think this will be a deterrent, particularly for private insurers looking to offer flood,” Ningen told
Insurance Business America. “Insurance companies are exploring taking flood risk on their own balance sheets because they want their clients to have a better experience, and I think that will stem a lot of the fallout.”
Ningen added that better meeting consumer needs trumps any past distrust, and that as more carriers “get [their] hands around the peril,” they will be able to increase their own value proposition.
In order to be more active in the flood space in the Northeast or elsewhere, the insurance industry is pushing for the passage of the legislation that would explicitly endorse their presence. At the moment, the Flood Insurance Market Parity and Modernization Act is stalled in the Senate following passage in the house, and proponents are not hopeful a lame duck Congress will make the bill’s passage a priority.
Related stories:
Flood insurance anger surges as NPR report claims insurers profited $400M after Sandy
Shift in climate patterns makes flood insurance more important than ever
