New Technology to Drive Better Prediction, Pricing of Florida Flood Risk

Actuarial experts, disaster modelers and third-party vendors are utilizing new technology to better predict and price flood risk – and Florida’s private market has responded, with the number of companies writing flood insurance doubling from 10 to 20 firms in the past year. New technology is making structures more resilient than ever to floodwaters, allowing those insurance companies to more accurately price risk and compete with the federal government’s National Flood Insurance Program (NFIP).

“NFIP and parent FEMA primarily use outdated maps to predict flood losses when, in fact, current catastrophe model technology is more granular with the ability to assess an individual home’s risk rather than a region on a map,” said Lisa Miller, a former Florida deputy insurance commissioner and host of The Florida Insurance Roundup podcast, which explores this topic. “Models help differentiate flood risk between a property owner in Zone X with mitigation and resiliency features versus another home in Zone X without resilient structural improvements. Consumers win when insurance premiums reflect a flood strong home versus one that isn’t. As such, private insurance companies will enter the marketplace and compete for the business,” said Miller.

New state legislation this spring is encouraging a robust private flood insurance market in Florida, while Congress works this summer to reform the beleaguered and costly NFIP, which has nearly two million Florida policyholders, almost 40 percent of all NFIP policies.

Miller discusses new consumer choices and benefits on the latest episode of The Florida Insurance Roundup with Mike Graham of Smart Vent Products, who has been working with modeling firms that are part of the new technology. During the podcast, he shares how flood vents, dry proofing and other mitigation options are lowering flood risks and with them, policy premiums by up to 80 percent.

“Just as wind mitigation years ago helped lower homeowners and wind insurance rates, today’s flood mitigation techniques can lower private flood insurance rates, making flood coverage more affordable – and available – for everyone,” said Graham.

FEMA estimates that for every $1 spent on pre-disaster mitigation, $4 is saved in insurance claims. Graham on this podcast shares his experience on some of the newest mitigation technologies and practices, including vents that allow flood waters to wash into – and back out of – structures, minimizing damage. A study of a two-square mile area in New Jersey that suffered $1.2 million in flood claims losses showed through modeling how pre-mitigation would have eliminated the structural damage and reduced the entire area’s flood height by one inch. That one inch, while it sounds modest, equates to a $20,000 cost avoidance per claim according to FEMA.

Listen to The Florida Insurance Roundup “Growing Florida’s Private Flood Market – Part Two” here: http://lisamillerassociates.com/category/the-florida-insurance-roundup-podcast/