Flood insurance sales may not be linked to the occurrence of natural disasters, new data from the Insurance Information Institute reveals. According to the III’s annual Pulse survey, just 10% of homeowners and businesses in the Northeast currently carry flood insurance—down from 14% in 2012.
That decrease follows Hurricane Sandy, which left thousands of homes flooded and caused an estimated $65bn in damages. Similarly, just 15% of properties in the South have a separate flood insurance policy despite the $81bn in damages caused by Hurricane Katrina.
This data stands in direct contrast to the popular belief that major storms and flooding events lead to increased sales of flood insurance.
Carole Walker, director of the Rocky Mountain Insurance Information Association, believes the decision to purchase flood insurance largely remains one of affordability, even in the face of increasing storm events.
“Flooding is our most common natural disaster that isn’t covered under a standard policy, but unfortunately, most people don’t carry insurance,” said Walker, whose native Colorado boasts just 22,000 flood insurance policyholders despite recent rainstorms. “Flooding takes many people by surprise, and most people just weigh the risk and decide to run with it.”
However, home and business owners who choose to ignore the lessons of events like the Colorado floods and Hurricane Sandy do so at their own peril. The III notes that 25% of businesses that close their doors after natural disasters never reopen them, and Walker said federal resources like FEMA won’t always be there to help.
“How do you recover from something when you don’t have insurance?” she said. “People assume that these large-scale disasters will always be followed by a federal emergency declaration that will help them out. That isn’t always the case.”
Producers need to ensure that their clients recognize the importance of flood insurance, even if they feel the odds are in their favor.
“The big message here is, yes…we do get flash floods,” Walker said. “It’s our most common natural disaster, and we really urge agents to offer flood insurance to everyone and everyone should consider purchasing it, weighing their risk.”