It is likely that you have read recent headlines sounding the alarm over a potentially uninsurable future.
The ongoing threat of more frequent and damaging extreme weather is making it increasingly difficult for homeowners to secure affordable insurance, highlighting a growing insurance protection gap.
Hurricane Milton and Hurricane Helene have in the most tragic ways only added to this alarming trend.
Outdated Policies, Regulatory Challenges
One major issue that insurers are facing is the reliance on FEMA’s flood maps, which are outdated and don’t accurately reflect current risk levels. Many of these maps are decades old, leaving insurers blind to actual risks.
According to FEMA officials, the flood insurance maps need to be updated to account for the evolving landscape and changes in climate. This puts private insurers at a disadvantage, as they cannot properly price risk. This lack of granularity in maps and risk data is another issue as insurers have struggled to engage better quality data in their models.
This data gap makes it hard for insurers to predict where and how severe flooding will be, which is leading many to simply avoid offering flood insurance in general.
New Models May Help Close the Gap
New catastrophe models are improving insurers’ ability to assess risk, but the gap between public and private data is still significant.
In response, insurers are developing more advanced tools to quantify risk but lack consistency between public and private models.
New models for flood risk help bridge this gap by offering real-time, property-level risk assessments. This allows insurers to offer coverage in areas where data is lacking or where FEMA/NFIP maps designate properties as high risk.
Innovation in advanced flood modeling — at the individual property level — can enable private carriers to engage with affordable insurance offerings to households previously considered too risky.
To conclude: Innovation is a key component in narrowing the insurance coverage gap and fight the impacts of climate change
Read the full analysis in the Insurance Journal: here.