Ten years ago, on 3 June 2016, we bound our very first Hiscox FloodPlus policy. The flood cover was for a modest home on Surfside Avenue in Winthrop, Massachusetts, but it marked the beginning of a new product and an innovative approach to providing residential flood cover in the US.
Fast forward to today, a decade later, and FloodPlus has become the leading Lloyd’s-backed flood market, with residential and commercial policyholders benefitting from a product that continues to evolve to offer state-of-the-art and accessible flood protection across the US.
We offer more extensive coverage than the National Flood Insurance Program (NFIP), providing wider protection and higher coverage limits, giving our customers the confidence that they are well supported should a flood occur.
Regulation eases the way for the private market
It was the introduction of the Biggert-Waters Flood Insurance Reform Act in 2012 that helped to open the door for FloodPlus. The Act sought to limit losses related to the federally funded NFIP by reducing flood insurance subsidies and making sure that the actual flood rates charged more accurately reflected the cost of the risk. Followed by the Homeowner Flood Insurance Affordability Act in 2014, the regulatory regime in the US was clearly moving in favour of greater involvement from the private flood insurance market. So, we moved quickly and took our opportunity to tap into the huge potential the market offered and offer homeowners another option for their flood protection.
Better cover: better price
From the outset, we knew that we could offer a competitive offering in the market by designing a product that offered customers higher limits and a broader and easier to understand policy wording that set a new benchmark for clarity. We knew that if we used technology to both better understand the risk on a more granular basis, as well as to distribute the product more effectively, we could create a flood insurance policy that people not only wanted to buy but also one that was accessible to many more homeowners, offering fair pricing tailored to each location.
Technology delivers scale and accessibility
Working with our distribution partners in the US, we also knew that the ability to scale the product was critical, so we adopted an API (Application Programming Interface) driven software solution. This allowed us to seamlessly push the product to our US coverholders and agents for quoting and binding: FloodPlus was born as a product that could work alongside the existing NFIP flood provision in the US.
On launch, back in 2016, the reception to the new product was hugely encouraging and we picked up a Lloyd's Innovation award that year – recognition from our peers that FloodPlus had quickly made a big impact on the flood market in the US.
Water resistant
Of course, the test of any insurance policy is whether it delivers when a policyholder needs it most and any flood insurer would have been tested by the 27 trillion gallons of water dropped over Texas and Louisiana during the six days of Hurricane Harvey in 2017. For some carriers, the losses might have meant a sounding of the retreat from the market but with lessons learned, the experience motivated us to move forward with the development of FloodPlus and explore new ways of improving and developing the product for our customers and partners.
Since then, FloodPlus has been tested by numerous other weather events (hurricanes Ida, Ian and Helene) and even human events – notably the introduction of the NFIP’s Risk Rating 2.0 which initially threatened to disrupt the competitive advantage of the private insurance market – but has continued to go from strength to strength. The introduction of FloodPlus Commercial and a new service delivery team in our York office in the UK have all helped to drive growth and serve our customers and coverholders better, while underpinning the long-term sustainability of FloodPlus.
A FloodPlus future
While it’s been a hugely successful decade, in many ways we’ve only just got started. The US flood insurance market is significantly underserved when it comes to flood cover, with millions of homeowners and business owners going without flood insurance. It’s estimated that 96% of homeowners do not buy flood protection, and given there are 145 million housing units across the US, it doesn’t need an actuary to understand how much potential premium the market could support (although it does of course need an actuary to help develop a sustainable product that strikes the right balance between pricing and risk exposure). Exploiting that opportunity, though, depends on the private market’s ability to innovate and respond to customer needs in areas like bespoke limits, product flexibility and broader cover.
A low minimum flood premium
A major barrier to growth in the private market has always been price and I believe we have made big strides in that area through FloodPlus’s use of enhanced analytics and real-world data, allowing us to bring our minimum premium down significantly in certain US flood zones – offering a low minimum annual premium of US$125 (not including any additional taxes incurred or fees charged by the coverholder/agent).
Given the changing nature of the flood risk in the US, particularly when it comes to exposing homes and businesses to flooding in areas where historically there have not been problems, we need to lower the barriers to buying flood insurance protection and persuade home and business owners that the decision to buy flood cover should no longer be ‘why would we?’ but ‘why wouldn’t we?’ This approach is central to our mission to close the insurance gap and protect more people by expanding our inland reach.
Working with, not against the policy makers
We have achieved a lot, but we know we can continue to do more. It’s why we are happy to represent the private flood insurance market’s perspective during the Federal Emergency Management Agency’s (FEMA) recent review of flood effectiveness in the US as it looks for ways to make disaster response and the NFIP’s flood insurance offering more financially stable and efficient, while giving more responsibility to state and local governments. Being involved in these high-level discussions allows us to have a direct say in how the US flood insurance market evolves and means we can advocate for practical solutions that benefit both consumers and insurers. It also means we are well positioned to anticipate and respond to any regulatory changes that could create future opportunities for our business and our clients.
It’s an industry-wide effort
It’s an exciting future for the private flood insurance market and for FloodPlus in particular, but, of course, it’s an industry-wide effort. And while we’re proud of what we have already achieved, we know that much of the success is thanks to our customers, coverholders, agents and brokers whose insight, feedback and support have helped us build the product into what it is today.
Here’s to another ten years of supporting home and business owners and contributing to greater flood resilience in the US!
