Guest author and SpatialKey data partner, JBA Risk Management, explains how flood data and mapping innovations can help insurers succeed in the U.S. private flood insurance market.
Despite more than 200 million people and two-thirds of the contiguous U.S. being at risk from flooding, only an estimated 15 percent of U.S. homeowners have flood insurance policies. As a result, it’s clear there’s a latent opportunity for insurers within the U.S. private flood market. However, without adequate flood data, it’s impossible for carriers to actively engage with the market and confidently underwrite and price flood risk.
One of the key historical barriers with flood data has been the failure to demonstrate different flood severities and frequencies. Let’s take a look at why this is so important when evaluating a property’s flood risk.
Use case: Jacksonville, Florida
Jacksonville is one of the five most vulnerable cities to hurricanes on the U.S. East Coast and a city at high risk from flooding, having experienced widespread storm surges and flooding during hurricanes Irma and Matthew.
In terms of understanding the full picture of flood risk, we can see that the devil is in the detail in the case of the below commercial property located on San Marco Blvd. in Jacksonville. This small business had to close its doors for good due to extensive damage from Hurricane Irma. NOAA and FEMA flood maps both rate the property as at high risk to flood (Figure 1 below).
Figure 1: FEMA and NOAA both rate this property in Jacksonville, FL., as high risk of flooding; however, a few critical details are missing. Data provided by FEMA and NOAA SLOSH.
While we know the property has a high risk of flooding, without the granularity of understanding the different flood types by different return periods, we don’t know how severe. Using a data enrichment and geospatial analytics solution like SpatialKey, we can see what’s driving the flood risk and the breakdown of different possible water depths provided by the JBA Flood Map (Figure 2 below).
Figure 2: JBA’s flood risk score for this commercial property in Jacksonville, FL., tells a more complete story, including flood depths and return periods, helping insurers better understand what is driving this property’s flood risk.
The FEMA and NOAA maps indicate locations that could be affected by flooding; however, without knowing the probability of the flood or understanding to what depth the water might reach, our understanding of the actual risk is still limited. A 100-year flood zone shows the areas that have a one percent chance of flooding in any given year. If that’s a one percent chance of being flooded by three inches of water, an insurer may decide it’s a risk worth taking. But, if it’s a one percent chance of being inundated by three feet of water, the resulting flood claim would be significantly higher and their decision might be quite different.
And, what about the flooding that may be less intense, but more frequent? A 20-year flood zone shows areas that have a five percent chance of flooding happening each year. In this case, even if the likely inundation is fairly shallow, the risk might be considered too high, especially if the address is subject to flooding from more than one flood type.
Ultimately, having the granularity to see likely flood depths at a range of return periods for all possible flood types is crucial for making decisions and understanding potential severity and cost of claims. The Jacksonville use case demonstrates why flood risk goes far beyond surface information. Only by digging into the details and understanding the specific drivers of a property's flood risk, can insurers accurately and confidently evaluate and underwrite flood risk.
Next week we'll discuss why contextualization is key to understanding the full flood risk picture.
Check out this eBook to learn how recent advancements in flood data and analytics are helping insurers gain renewed confidence in their U.S. flood risk assessment and selection:
Helen Smith holds a bachelor's degree in Geography, specializing in fluvial processes and geomorphology. She leads JBA’s Global Flood Mapping team, which is responsible for developing flood maps for every country in the world. Following the successful release of JBA's 5m Florida Flood Map, Helen is now focused on completing high-resolution 5m flood maps for the contiguous U.S.