U.S. businesses drastically misjudging flood risks, Chubb reports
Nearly half of brokers surveyed by Chubb said their clients don’t request flood insurance quotes.
A majority of U.S. businesses are unprepared to face flooding risks, according to Chubb’s “Rising Waters” broker survey, which found that 85% of companies mistakenly think property insurance will cover “all or most” types of flooding.
Chubb also noted nearly half of brokers surveyed said their clients don’t even request flood insurance quotes. Further, 84% of brokers said their clients don’t purchase any type of flood coverage and 41% said this is because business owners struggle to assess their risks.
Several factors influence how a business views its flood risk, including reliance on FEMA flood maps, which Chubb noted were outdated and incomplete. Additionally, FEMA’s maps were not designed to take into account the most common causes of flooding, such as extreme and severe bursts of rainfall.
According to Chubb’s Gregory Tesche, senior vice president, commercial insurance, private commercial flood insurance models have improved vastly in recent years and can help businesses fill in the missing details.
“Today, we use multiple models from different sources to support a more thorough flood risk assessment, including models that increasingly incorporate the here-and-now impact of climate risk,” Tesche said in the report. “They can illuminate details like the impact to an area if it is exposed to an accumulation of water due to torrential rainfall.”
Why business owners buy flood coverage
Chubb’s survey of brokers also uncovered that most (58%) of businesses that do buy flood insurance do so to meet a lender requirement. Around half said they purchased because the business was located in a high-risk area, while 39% bought coverage because they suffered an uninsured flood loss.
Slightly more than 30% of brokers said their clients bought flood coverage due to recent flooding in their area.
Around 44% of the businesses that bought flood coverage obtained National Flood Insurance Program standalone and flood endorsement to existing property cover, while 40% purchased standalone flood coverage. Chubb reported that 16% bought a monoline CAT policy covering floods and earthquakes.
More than half of the brokers surveyed also said they anticipate more clients purchasing flood insurance in the coming three years. According to Chubb’s survey, the growth in commercial flood will be driven by four reasons:
- Increasing awareness that property insurance doesn’t cover most flood damage.
- Increasing number of catastrophic floods.
- Increasing awareness of climate-related risks.
- Increasing number of people living and working in high-risk areas.
“It can take years for a business to recover from a serious flood,” Erik Olsen, senior vice president and leader at the Property Center of Excellence for Chubb North America, said in the report. “With a holistic understanding of their flood risk, businesses can prioritize investment resources and make actionable plans to address worst-case scenarios and create business continuity.”
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