Severe weather events are becoming increasingly common, and the demand for flood insurance is rising as a result, with insurers having to balance the added risk. GlobalData surveys find that demand for flood damage to be covered in the US and around the world is very high, while Guy Carpenter has warned of the ever- increasing risk of flood damage as we head into 2025.
GlobalData’s 2024 Emerging Trends in Insurance Survey found that 61.4% of US consumers said that flood cover as part of household insurance was either desirable or very desirable. This was slightly less than the combined global average of 67.0% (boosted by very high scores in South Africa [84.4% combined] and China [77.7% combined]). Nonetheless, it still highlights the strong demand for flood damage to be covered in the US.
How desirable is cover for flood damage in personal household insurance policy? The US, 2024
This is a dilemma that household insurers will have to weigh up as they create policies. Many areas of the world, and especially the US, are becoming increasingly high-risk and dangerous for insurers to offer comprehensive cover to. They can and will increase premiums, but inflation remains high in many countries—the US being one—and consumers cannot continue to be squeezed. Guy Carpenter also believes that previously low-risk areas will become more prone to flooding due to high rainfall, which will create more regions where insurers will look to limit exposure.
The significant demand for flood coverage in the US and beyond indicates that insurers willing to offer it will be able to increase retention and penetration rates. For insurers, it is a case of balancing risk and assessing how much potential flood damage exposure they want to take on. Insurers looking to capitalize on this should look towards preventative measures, such as making sure properties are as prepared as possible and providing advanced weather warnings to customers.
