Flood Claim Spotlight: How IA Firms Can Prepare

For claims professionals, flood claims represent unique challenges. As flood risks increase, it’s important to be prepared for a deluge of claims.

Flood Risks Aren’t Confined to Coastal Areas

According to FEMA, flooding is the costliest natural disaster in the U.S. It’s also the most common. In the past five years, all 50 states have experienced floods or flash floods. If it rains, it may flood.

Although floods are often associated with hurricanes and ocean surges, other bodies of water may also flood, including smaller rivers and streams. Unfortunately, the flood warnings the National Weather Service issues don’t always cover these smaller bodies of water. Cobb Country Courier says the streamgage network of sensors used to provide real-time information on flood risks only cover less than 1% of the rivers and streams in the U.S.

Hurricanes, Severe Storms, and Old Dams

Floods have always posed a significant threat, but the risk may be growing.

For one thing, storms are becoming more severe. NASA says severe floods, rains, and other types of extreme weather are becoming more frequent and more intense as the climate changes. Even areas without hurricane risks may see more severe convective storms. According to Swiss Re, insured losses from severe convective storms have increased at a rate of approximately 8% each year since 2008.

Aging infrastructure may make the problem worse. When Hurricane Helene caused catastrophic flooding in western North Carolina – an area that many people previously believed to be safe from climate change disasters – many feared that dams in the area would fail and lead to even worse damage. Thankfully, this worst-case scenario did not happen, but next time could be different. According to the Association of State Dam Safety Officials, more than 2,330 high-hazard dams are considered deficient. The risk of failure increases as dams age – and the average age of U.S. dams is 61 years. These dams are not expected to withstand current flood and earthquake predictions unless they are upgraded.

Flood Claims Pose Unique Challenges

Flood claims are particularly challenging for claims professionals for several reasons:

  • Coverage is complicated. Standard property insurance policies exclude flood losses. As a result, insurers will likely deny damage caused by storm surges and ground water. To complicate matters further, policies do typically cover some types of water damage, including water that seeps into a building from a leak in the roof. Storms often involve both wind damage to roofs and floods at the same time, meaning determining whether a policy covers the resulting water damage is often complicated.
  • Misunderstandings are common. To insurance professionals, it’s common knowledge that property insurance excludes flood losses, but property owners are often unaware of this fact. In a Trusted Choice survey of policyholders, 56% didn’t know that a standard homeowners insurance policy excludes flood damage. Unfortunately, many people only discover the truth when they’re facing a claim and need money for repairs. When a claims professional correctly denies the claim, these policyholders may become angry, leading to ugly disputes.
  • Flooded regions may be dangerous and difficult to access. A flooded area may be cut off from the rest of the country. Power may be out and roads blocked, making it difficult to communicate. The area may also be unsafe until the flood waters recede.
  • Time is of the essence. When widespread flooding strikes an area, insurers face a surge in claims volume. However, each claim requires a fast response. The longer flood damage remains, the greater the threat of mold and other hazards that could lead to increased property damage and even health risks.

How Claims Professionals Can Prepare for the Deluge

Flood losses may become worse in the coming years due to climate change. With modern technology, IA firms can increase their readiness.

The VCA claims management platform facilitates fast claims processing while supporting transparent communication. It is also scales to accomodate to higher claims volumes. VCA’s Claims Core delivers an efficient claims engine that handles everything claims professionals need, including Lloyd’s reporting. To customize the system, add VCA’s other innovative add-ons, such as the InsuredConnect mobile app for claimants, and the mobile app for adjusters.

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