For decades, flood insurance has been an afterthought for many property owners - something they don’t think about until a lender requires it, and despite the increasing risks posed by climate change and urban expansion, many homeowners still opt out of coverage unless it’s mandated, said Patty Templeton-Jones (pictured), president and chief program advocate of Wright Flood.
“When we first started, approximately 60% of our business was not required to be written,” she said. “But again, it was more about educating the general public.”
But as the climate shifts, so too do the realities of flooding. Areas that historically remained dry are now finding themselves underwater. The mapping issue further complicates things. Federal flood maps, which many lenders, floodplain managers and others rely on, can sometimes be outdated.
“Areas that didn’t flood are now flooding. Is it climate change? Absolutely. But I think even bigger than that is they're putting structures and concrete where green space previously was. You must have adequate runoff. You must have pieces that protect, and I don't think that is handled as well as it could be,” she said.
“If you have a map that's five, 10 years old, but you keep on building out the infrastructure - where’s the water going to go? Are we telling people, based on that flood map, ‘Oh, you’re really not at risk,’ when you are?”
One of the biggest challenges in expanding flood insurance adoption is that many homeowners don’t see value in it, with basement coverage being a key sticking point for many potential policyholders.
“The take-up rate in the Midwest is minimal. And the reason being is because the general public feels what they have at risk is their basement,” Templeton-Jones said. “There’s limited coverage in a basement, so in their mind, this policy isn’t worth the money you pay for it.”
Private insurers have started stepping in to fill these gaps, offering coverage where NFIP policies fall short. These insurers are addressing these issues by providing more comprehensive policies that include things such as additional living expenses and full replacement value for damaged property.
“Let’s look at here in Florida, where we had these two horrific storms,” she said. “Your NFIP policy doesn’t cover additional living expenses. Your contents are only at actual cash value versus replacement costs. That’s where the private companies are coming in and filling those gaps. And I know there is some discussion in Washington for FEMA and the NFIP to do something similar.”
The flood insurance market has seen a rise in private insurers entering the space alongside the NFIP. But where does that leave government-backed policies in the long run?
“It could go a couple of ways,” she said. “As you get better coverage in the private market, people may gravitate toward that in low-event years because that makes sense. But if there’s an event, some private markets may decide, ‘OK, I need to retrench a little bit.’ So, then it goes back to the NFIP.”
Some speculate that NFIP could become the “market of last resort,” like state-run Fair Access to Insurance Requirements (FAIR) plans in homeowners' insurance. Templeton-Jones isn’t convinced the market is there yet.
“FEMA is still very viable,” she said. “It’s becoming more actuarially sound.”
One major policy issue remains unresolved: private flood insurance being considered continuous coverage to the NFIP.
“The biggest thing that could help the policyholder is that private flood would be considered continuous coverage,” she explained. “Right now, if an insured leaves to go to the private market, for whatever reason, and then wants to go back to the NFIP, they can’t go back to their old rates. They immediately go to actuarial rates.
“It just makes sense—if you’ve always had a policy, that should be considered continuous coverage,” she added. “But at the time, FEMA views it as it has to be an NFIP policy.”
Advances in predictive modeling and digital tools are transforming how insurers assess flood risks and streamline claims.
“The models are absolutely getting better,” she said. “When you have an event, it enables companies to see how their portfolio responded and what can be done to improve performance.”
However, she cautions against relying on a single model.
“You should look at numerous models,” she said. “One may be better for surge, or maybe it may be better for inland flooding. But when it comes together and you feel like you have priced your product properly, it enables the company to manage their writings and their exposures.”
Flood insurance is evolving, but the challenges remain steep - from educating homeowners on the true risks, to bridging gaps in coverage, to navigating the balance between private and public insurers. As the risks increase, the industry will have to adapt quickly. And for Templeton-Jones, that means one thing above all: “The education has to be ongoing,” she said. “I’ve been doing this for 30 years. It’s getting better, but that needle is still moving slowly.”
