Survey finds mid-market businesses are unprepared for the risks they face from flooding
US mid-market companies are largely unaware of and unprepared for the risks their businesses face from flooding, according to a new report from Chubb.
In order to measure businesses’ perceptions of flood risk, Chubb surveyed insurance brokers, who the company said were well positioned to understand their clients’ awareness of flood risks and the available insurance options.
According to the report, 85% of mid-market companies mistakenly believe their property insurance covers some, most, or all kinds of flooding. The report also found that only a small minority of businesses know that flooding is the most common – and the most costly – natural disaster.
“Taken together, the survey results show a severe underestimation of the gravity of commercial flood risk and underscore the urgent need for education around the severity and frequency of floods, even in traditionally low-risk areas,” Chubb said.
Floods in the US have cost taxpayers more than $850 billion since 2000 – two-thirds of the cost of all natural disasters, Chubb said.
“Flood risk is far more pervasive with the increasing frequency and severity of extreme weather events,” said Louis Hobson, senior vice president of North America flood insurance at Chubb North America. “This report shows that far too many companies are unknowingly uninsured against flood risks. It is incumbent on insurance carriers and brokers to educate the marketplace and ensure organizations understand the risks of flood and the protections available.”
Key findings of the report include:
- 85% of companies believe their property insurance covers some, most, or all types of flooding. Fifty-six percent of brokers surveyed said that organizations they serve don’t purchase flood insurance because they believe it is already covered in their commercial property policy. The vast majority – 84% – reported that most of their clients do not purchase any flood insurance
- The report revealed a widespread lack of understanding about flood risk. Sixty-nine percent of brokers surveyed believe that only a small minority of businesses know that flooding is the most common and expensive type of natural disaster. Nearly half (45%) said their clients do not even request a quote for flood insurance
- The report also found that there was a lack of consensus around defining the multiple causes of flooding, with the most widely held perceptions focusing on the overflowing of a body of water (67%), inundation/heavy rainfall (56%) and surge/tidal waves (43%)
The survey findings demonstrated that it is urgent for the insurance industry to clarify flood coverage details, Chubb said. Businesses should also focus on building resilience into their properties to help mitigate the impact of flooding.
Hobson recommended that businesses take the following actions:
- Assess risk factors that could impact their operations
- Seek flood insurance quotes to provide clarity on what is covered by commercial property insurers
- Make use of insurance carriers’ tools and technology to build resilience and mitigate flood exposure
- Utilize loss-prevention services, including Internet of Things devices that can help predict and prevent property damage
- Engage in regular partnerships with insurers and brokers to adapt to the changing reality of flood risk
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