Market Trends & Economy

Chubb’s Survey Reveals Flood Insurance Misconceptions

Chubb's survey highlights a significant gap in flood risk awareness and preparedness among U.S. mid-market companies
Key Takeaways:
  1. Widespread Coverage Misconceptions: The survey by Chubb reveals that 85% of mid-market companies in the U.S. mistakenly believe their property insurance covers various types of flooding, indicating a significant gap in understanding flood insurance coverage.
  2. Regional Underinsurance Variations: The report highlights the South as the region with the highest underinsurance rate for flood coverage, followed by the East, West, and Midwest, showcasing a disparity in insurance perceptions across regions.
  3. Lack of Awareness and Preparedness: Most businesses lack a basic understanding of flood risks, with only a tiny minority recognizing that flooding is the most common and costly natural disaster. This points to a critical need for increased awareness and education.
  4. Inconsistent Definitions and Perceptions: Businesses have varying definitions and understandings of flood causes and exposures, which complicates the process of obtaining adequate coverage and understanding the risks involved.
  5. Urgent Need for Industry Response: The findings underscore an urgent need within the insurance industry to clarify coverage details and educate businesses on the importance of flood insurance and risk mitigation strategies.

Chubb, the global leader in property and casualty insurance, recently surveyed the alarming lack of awareness and preparedness for flood risks among U.S. mid-market companies. The study, focusing on businesses with revenues between $10 million and $1 billion, reveals critical gaps in understanding and protecting against flood damages.

Coverage Misconceptions: A Major Challenge

One of the most striking findings is the widespread misconception about flood coverage. A staggering 85% of companies erroneously believe their existing property insurance policies cover flooding. This misconception is further reinforced by over half of insurance brokers, who indicate that their clients assume flood insurance is included in their commercial property policies. The result is a significant disconnect between perceived and actual protection against flood risks.

Regional Underinsurance and Its Implications

The survey also points to regional disparities in flood insurance coverage. The South leads with the highest gap between perceived need and actual coverage, followed closely by the East, West, and Midwest. This regional variation highlights the need for tailored educational and insurance solutions addressing specific regional risks and misconceptions.

The Broader Context of Misunderstanding

The lack of understanding extends beyond coverage misconceptions. Approximately 69% of brokers perceive that only a minority of businesses are aware of the prevalence and costliness of flooding as a natural disaster. Additionally, businesses need a consensus on defining floods and their causes, with perceptions varying from water body overflow to heavy rainfall and tidal surges.

Industry’s Call to Action

Louis Hobson, Senior Vice President of North America Flood Insurance at Chubb, emphasizes the urgent need for education in the marketplace. Chubb’s report calls for a concerted effort by insurers and brokers to ensure businesses understand the risks associated with floods and the available protections. Hobson advocates for businesses to assess risk factors, seek precise insurance quotes, and build resilience through insurance tools and technology. He also recommends utilizing IoT devices for loss prevention, highlighting Chubb’s commitment to empowering businesses to make informed decisions and build resilience against flood risks.

About Chubb

Chubb, a global property and casualty insurance powerhouse, offers various insurance products and services. Known for its disciplined risk management and prompt claim services, Chubb operates in over 50 countries and territories, servicing a diverse client base. The company’s strong financial foundation and commitment to excellence make it a leader in the insurance industry.

Chubb’s survey critically examines the current state of flood risk awareness and preparedness among U.S. mid-market companies. The findings highlight the need for increased education, more transparent communication about coverage, and more proactive risk management strategies to mitigate the impact of floods.

Photo by Jonathan Ford on Unsplash 

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