Flood was a peril once thought to be uninsurable by the private insurance market. Today, the sector is poised to grow rapidly. Milliman consultants Nancy Watkins and Dave Evans are optimistic that private insurers will significantly close the U.S. flood “protection gap” in a few years by routinely offering flood coverage alongside most homeowners policies. In a recent Carrier Management article they authored, the consultants discussed trends in the private flood market leading to this prediction, and outlined several obstacles the market will need to overcome along the way.
To learn more about what flood insurance for U.S. homeowners could look like in a couple of decades, listen to the Critical Point episode entitled “The future of flood insurance.”
If you’ve watched the news recently, it will come as no surprise that flooding has become a major issue for communities across the United States. In this episode of Critical Point, Milliman consultants Nancy Watkins and John Rollins discuss the history and future of flood insurance. They also explore what flood coverage for homeowners could look like a few decades from now.
The visibility of climate change’s impact on property hazard is increasingly leading individuals and their chosen leaders to ask: how might an increase in hazard affect the desirability of living in various communities and how do we manage the socioeconomic effects? Recent stories have highlighted the concerns of “climate gentrification,” or potential migration from low-lying but relatively well-off areas to areas of higher elevation but sometimes higher poverty.
Milliman has worked with Jupiter Intelligence, a climate risk analytics provider of forward-looking and probabilistic hazard data for future conditions, to develop a framework for analysis that may spark insight for community leaders in the public and private sectors who are charged with managing climate change and planning for a resilient future. This paper by Molly Barth and John Rollins investigates insurance risk, consumer costs, and resilience incentives under the stress of a changing climate in Broward and Miami-Dade counties.
When a 6.4 moment magnitude (Mw) earthquake struck Ridgecrest, California, in early July, followed closely by a 7.1 Mw event, many in the state worried it was the “Big One.” But while it was the most powerful California earthquake since 1999, and only the fourth exceeding 7 Mw in the past 40 years in California, Ridgecrest occurred in sparsely populated Kern County and won’t rival the state’s most destructive earthquakes.
As Milliman actuaries David Evans, Eric Xu, and Cody Webb write in their recent article, while not the “Big One,” the Ridgecrest event may prompt Californians to consider their exposure to this peril. Coverage for earthquakes isn’t provided by homeowners policies in California and insurance participation across the state is low, especially in some of the state’s riskiest areas—as this infographic depicts.
The U.S. private flood insurance industry is an emerging market with the potential for risks and rewards, none as important as helping Americans become more resilient against devastating floods. Several converging developments have transformed the formerly niche offering into a potential sustainable, large-scale business. These developments include rapid advances in technology, an abundance of risk capital, a break in the longstanding legislative status quo, and the human and economic impact of recent disasters on consumer awareness of the increasing flood hazard.
Establishing a greater private flood insurance market should benefit insurance consumers, helping to close the protection gap and improve the resilience of households and economies against future flood-related catastrophes. But as with most great undertakings, hard work and foresight are necessary for success. In this paper, Milliman consultant John Rollins explores some questions and challenges for aspiring U.S. private flood insurers.
Milliman has announced new features for Pixel™, Milliman’s web-based, interactive premium comparison and market analysis tool for personal residential and flood insurance.
With this most recent update, Pixel Homeowners now allows users to review premiums by peril. This more granular look at pricing helps insurers make more informed decisions around competitiveness and can help drive profitable market growth. Additionally, the Pixel product update includes the ability to incorporate loss and expense data such as expected losses from catastrophe models, enabling users to analyze competitive position and profitability at the same time. Businesses are able to view not only their own data in Pixel, but also to license Milliman’s market baskets, which include competitor premiums for hundreds of thousands of policy profiles, all calibrated to represent various state markets for both flood and residential property insurance.
Pixel’s updated features provide a granular market analysis that allows insurers to simultaneously compare competitiveness and profitability. As insurtech drives competition in the market, both new and established insurers are able to make more informed decisions around pricing strategy and market growth.
“We have found the Pixel tool extremely helpful in analyzing where and how to be more competitive,” says Kevin Walton, Managing Director of Underwriting and Risk Control at People’s Trust Insurance. “Now that Pixel splits the competitor premium by peril, we can focus on the area that will have the most impact on our competitiveness. Adding loss information to the analysis will also greatly enhance the usefulness of Pixel.”
To learn more or see a video about Pixel, click here. To learn more about Milliman’s insurtech products, click here.
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