Untapped Market for Insurance Sales
When most people think of flooding in the United States,
they think of hurricanes and the coastal states. However, many significant
rain events each year cause localized flooding for those living near
rivers, creeks, bodies of water and in low lying areas. In fact, according
to weather.com there have been more presidential flood disaster
declarations over the past 10 years for inland states than for costal
states. No state is immune from flooding. Yet fewer people are purchasing
flood insurance than have in the past. The Associated Press reports that in
2017 only 5 million flood policies were in effect where 5 years earlier
there were 5.5 million, a decrease of 10%.
With increased flooding and fewer flood policies being
purchased it is a good time to start selling flood
insurance. While I am not a real estate mogul, I have purchased 5 homes
over the past 35 years. I have never been SOLD flood coverage. Each home I
have purchased I asked my agent about flood coverage and each time I was
told my lender does not require flood coverage, end of sales pitch. When I
ask my agent about coverage for my wife's wedding ring, he does not tell me
my lender does not require coverage for it. Instead, my agent asks for an
appraisal and schedules the ring to my policy by endorsement. Wouldn't it
make sense to treat flood insurance the same way?
Following flood events, we see numerous flood related claims
turned in on insurance agents' E&O policies. While some of these claims
are justified, a great number of them are not. The leading reason we see
claims for flood related losses is due to lack of flood coverage. Either
the customer thought flood was included in their property policy or the
agent told the customer they didn't need flood insurance. These claims are
much easier to defend when flood coverage has been offered to the customer
and the customer has rejected it. Better yet, if flood coverage is offered
and accepted, we see no claim and the agent earns a commission.
The NFIP manual and policy are constantly changing. If you
are going to sell flood coverage, you need to understand what you are
selling. The second most frequent reason we see for flood related E&O
claims is a lack of understanding of the NFIP manual and policy. From
experience, we have seen it works best to have someone in your office
become an expert on the NFIP manual and policy. That person can stay
abreast of the changes and help explain flood coverage to potential
Once you or someone in your office has mastered the NFIP
policy, do not keep that information to yourself. Most insurance consumers
are acquainted with the property policy, but not with a flood policy. It
will help curb expectations of your customers if you explain to them the
differences between a flood policy and a property policy. After a flood
loss is not the time to be telling your customer that their coverage is not
as broad as what they were expecting.
My last two pieces of advice are to tear-up your outdated
flood zone maps and be mindful of elevation certificates. We see E&O
claims where agents are using outdated flood zone maps. These claims are
nearly impossible to defend. We also see claims where there is a delay in
getting an elevation certificate or the elevation has changed due to
renovations and the agent does not submit a new certificate. Be sure to
document that you have told the customer you cannot obtain flood coverage
until the property owner gets you the elevation certificate. Never offer to
obtain an elevation certificate for a customer.
I hope this article makes you look at how your agency sells
flood insurance and points you to an untapped market of potential
customers. While flooding could affect any property owner, the numbers tell
us few are insuring against that risk. Take up the challenge to offer flood
insurance to every property owner for whom you write coverage and make them
decide whether they want to purchase or decline the coverage. With every
offer you will either earn a commission or a defense against a subsequent
E&O claim, when that customer does suffer a flood loss.
Jim Redeker is vice president and claims manager at Swiss Re
Corporate Solutions and works out of the office in Kansas City, Missouri.
Insurance products underwritten by Westport Insurance Corporation, Kansas
City, Missouri, a member of Swiss Re Corporate Solutions.
This article is intended to be used for general informational
purposes only and is not to be relied upon or used for any particular
purpose. Swiss Re shall not be held responsible in any way for, and
specifically disclaims any liability arising out of or in any way connected
to, reliance on or use of any of the information contained or referenced in
this article. The information contained or referenced in this article is
not intended to constitute and should not be considered legal, accounting
or professional advice, nor shall it serve as a substitute for the
recipient obtaining such advice.