The survey focused on mid-market companies, primarily ranging between $10 million and $1 billion in size, and uncovered a startling misconception regarding insurance coverage for flooding.
A staggering 85% of companies mistakenly believe that their property insurance provides coverage for some, all, or most types of flooding. This widespread misunderstanding extends to the perception of the frequency and severity of flooding, with only a small minority recognising it as the most common and costly natural disaster.
These findings underscore a critical gap in awareness and preparedness for commercial flood risk, emphasizing the urgent need for education on the seriousness and frequency of floods, even in traditionally low-risk areas.
Floods in the United States have incurred costs exceeding $850 billion since 2000, representing two-thirds of the total expenses related to natural disasters. To assess businesses’ perceptions of this risk, Chubb commissioned a survey targeting insurance brokers, who play a crucial role in advising businesses on securing insurance coverage to mitigate various risks, including floods and other natural catastrophes.
The insights gleaned from brokers provide valuable insights into businesses’ awareness of flood exposures, understanding of available insurance protections, and familiarity with flood insurance and risk mitigation measures.
“Flood risk is far more pervasive with the increasing frequency and severity of extreme weather events,” said Louis Hobson, Senior Vice President, North America Flood Insurance at Chubb North America. “This report shows that far too many companies are unknowingly uninsured against flood risks. It is incumbent on insurance carriers and brokers to educate the marketplace and ensure organisations understand the risks of flood and the protection available.”
- Coverage Misconceptions: According to the report, 85% of companies mistakenly believe their property insurance covers some, all, or most types of flooding. Further, more than half of brokers (56%) said organizations they support do not purchase flood insurance because they assume it is already included in their commercial property policy. A large majority of brokers – 84% – report that most of their client base does not purchase any flood insurance. These findings suggest a major disconnect in perceived and actual flood protection.
- Top Regional Underinsurance Rates: The survey revealed the West as the region with the biggest gap between the purchase and perceived need (37%), followed by the South (31%), East (28%) and Midwest (23%).
- Widespread Lack of Understanding: These misconceptions and coverage gaps reveal a broader misunderstanding on preventing and mitigating flood risk. More than two thirds (69%) of brokers believe a small minority of businesses know that flooding is the most common and costly natural disaster. Nearly half of brokers (45%) say their clients do not even request a quote for flood insurance coverage.
- Inconsistent Definitions. There is also a lack of business consensus around defining the multiple causes of floods and flood exposure, with the leading perceptions focused on overflowing of a body of water (67%), inundation/heavy rainfall (56%) and surge/tidal waves (43%), among others.
The findings create a sense of urgency within the insurance industry to clarify coverage details, so that commercial property owners are not surprised when they discover their flood losses are not covered by existing policies. Businesses may want to focus on building resilience into their properties and operations to ensure they are adequately prepared for the long term.
Hobson recommends businesses consider taking the following actions:
- Assess the risk factors that may impact their operations.
- Seek flood insurance quotes to provide clarity on what is covered by commercial property insurers.
- Build resilience by using an insurance carrier’s tools and technology to mitigate flood exposure.
- Adapt to the changing reality through regular partnerships with insurers and brokers.
- Utilizing loss prevention services including Internet of Things (IoT) devices that can help predict and prevent property damage. Leaks and changes in temperature, humidity, or water pressure can cause damage to critical infrastructure and valuable assets.
Chubb is committed to empowering organisations to make more informed and sustainable decisions as they insure their businesses and provide services to help evaluate and create resilience.
To access the study, visit here
Meet Chubb leaders in Hong Kong at Insurtech Insights Asia 2023
Join leaders from Chubb at Asia’s largest insurtech conference – Insurtech Insights Asia 2023, in Hong Kong, at the Kerry Hotel on December 6th and 7th.
Sushmita Munshi, Chief Customer Officer, will be taking part in the session: “Predict & Prevent – Transformation of Life & Health Insurance in Asia.”
Om Bhatia, Head of Growth, will be a panelist on: “How Digitisation is Creating New Partnership Opportunities Between Brokers and Insurers.”
And Scott Simpson, President of Hong Kong and Macau, will be taking part in a fireside chat with Gloria Leung, Chief Customer Officer, Insurance Division, for Hang Seng Bank.
For more information on the conference, visit here
Author: Joanna England