A new survey of insurance brokers by Chubb, a global P/C company, found that flood risk was not top of mind for U.S. mid-market companies, valued between $10 million and $1 billion.
Nearly 85 percent of mid-market companies mistakenly believed their property insurance covers some, all, or most types of flooding.
More than half of the brokers surveyed (56 percent) said organizations do not purchase flood insurance because they assume it is already included in their commercial property policy.
A large majority of brokers, 84 percent, indicated most of their client base does not purchase any flood insurance, suggesting a disconnect in perceived and actual flood protection, the Chubb survey found.
The South was found to be the region with the biggest gap between the purchase and perceived need (31 percent), followed by the East (28 percent), the West (27%) and Midwest (23 percent).
A small minority of businesses recognized the most common and costly natural disaster is flooding.
The flood risk underestimation underscores the gravity of commercial flood risk and the need for education around the severity and frequency of floods, even in traditionally low-risk areas, the Chubb survey found.
“Flood risk is far more pervasive with the increasing frequency and severity of extreme weather events,” said Louis Hobson, senior vice president, 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 protection available.”
The misconceptions and coverage gaps reveal a broader misunderstanding on preventing and mitigating flood risk, according to the global P/C insurer.
More than two-thirds (69 percent) of brokers indicated a small minority of businesses know that flooding is the most common and costly natural disaster.
Nearly half of the brokers surveyed (45 percent) say their clients do not even request a quote for flood insurance coverage.
The survey found an overall lack of business consensus around defining the multiple causes of floods and flood exposure, with the leading perceptions focused on overflowing of a body of water (67 percent), inundation/heavy rainfall (56 percent) and surge/tidal waves (43 percent).
The findings suggest that mid-market businesses should focus on building property and operations resilience through flood mitigation tactics.