At the beginning of 2023, the U.S. witnessed historic flooding in California before tornadoes, hail and straight-line winds swept across Mississippi, Alabama and Georgia. Despite the frequency of these events and flood insurance's rising profile, inflation and an uncertain economic outlook can make flood insurance a difficult sell. 

Nevertheless, agents shouldn't be deterred. “Now is a critical time for agents to discuss the importance of flood insurance with all of their customers," says Cassie Masone, vice president, flood operations, Selective Insurance. “As prices for goods and services rise, consumers look to pare their expenses; flood insurance should not be an item to cut back on."

Here are three ways agents can demonstrate that they are knowledgeable about their clients' risks and educate them about why they should purchase flood insurance coverage:

1) Integrate flood into every conversation. Flooding is the single most common peril properties face, according to FEMA, and it's also the most costly. Yet, many clients are unaware that they need flood insurance or, if they are aware, how they can purchase coverage.

“I always encourage independent agents to have their staff integrate the flood conversation into every sale in the same way that many already do with other ancillary coverages like excess liability—make it part of the routine," says John Hannah, assistant vice president, lending and insurance solutions, SWBC.

“It's shocking how many insureds genuinely don't know they can even purchase flood insurance coverage if they don't live in a special flood hazard area, purchase more coverage than the NFIP offers, or look at alternatives to the NFIP that don't require elevation certificates or waiting periods," Hannah says.

As extreme weather events increase in frequency and severity, “clients are relying on us advisors to point out the perils that face their biggest assets," agrees Steve Rivera, partner, national personal lines practice leader, The Liberty Company Insurance Brokers. “Clients don't know what they don't know, so bringing your expertise to the table and showing clients that you are looking out for their best interest and allowing them to make informed decisions will always go very far with gaining their trust and building long-term relationships."

2) Understand the coverages available in your flood insurance market. “Risk Rating 2.0 has changed how the NFIP is pricing flood policies, so any agent looking to write an NFIP policy must understand the new rating guidelines associated with Risk Rating 2.0," Masone says. “They should be looking to their Write-Your-Own carrier for support to ensure they obtain all of the new rating elements required to get an accurate price."

Additionally, private and excess flood insurance coverage should be understood to ensure agents offer full-value flood coverage for their clients.

“It's also worth mentioning that every homeowners conversation surrounding flood should include additional living expense coverage, which is not available through the NFIP, but is regularly available if you're offering coverage through the private or excess market—sometimes it's included at no additional cost," Hannah says.

For high net-worth clients, “agents must understand the risk and be aware of coverage restrictions in the NFIP and available private market policies to offer excess flood insurance if warranted by the building type," Masone says. “Primary limits could be exhausted quickly, so tapping into an excess product could provide the extra coverage that a customer needs." 

However, insuring high net-worth homes against flood can be complex. “These structures are often built with high-quality, unique materials and are often very custom in design and features," says Wes Brum, account executive, Insurance Associates Inc.

“Insuring a high net-worth home is much more than insuring just a home," Brum says. “The clients who own high-value homes often will also have fine jewelry, arts, antique or luxury vehicles, and watercrafts."

“Purchasing excess flood insurance is a prudent move for homeowners with asset values that far exceed the parameters of primary flood coverage, which limits coverage at $250,000, especially if you are in a high-risk flood zone," Rivera adds.

3) Explain how technology is improving the experience. Technologies, including artificial intelligence (AI) and 3D property data, are becoming dominant features in the underwriting process. The use of drones to create aerial images of risk areas can help carriers and agents identify and manage risks.

“Many insurers are using aerial imagery in their underwriting process to look for surrounding hazards and, more importantly as it relates to flood insurance, be able to identify ground elevations and foundation types, which will likely impact the rate or cost of a flood insurance policy," Brum says.

“Climate change may be out of an insurance company's control; however, utilizing technology and AI to develop accurate catastrophe and flood modeling may be invaluable to an insurer as it will assist carriers in creating new products, increased limits but most importantly, predicting the probability of risks before they occur and mitigating those risks to avoid and reduce the number of casualties," Brum explains.

With technological advances, “carriers are able to remove the unnecessary steps from the underwriting process by streamlining the submission to quote process," says John Stammen, CEO, Convr, an AI company serving commercial insurance organizations. “Whether you're writing flood insurance or any other type of insurance, it's about data—and there's more data out there than we can consume." 

Speed and efficiency are key to supporting the underwriting process and AI is emerging as the game-changing technology of the insurance sector. As the use of AI expands, agents and carriers have the ability “to take a submission and pull out the critical elements of data, look at the publicly available data sources in real-time, fuse all that together, and then present to the underwriter answers that pre-qualify a submission," Stammen says.

Olivia Overman is IA content editor.