We’ve been here before. Only this time, we need to truly learn something from what is happening.
As I write this, Hurricane Harvey is relentlessly lashing the Lone Star State with a deadly trifecta of heavy rains, high winds and, as if that wasn't enough, tornadoes. More than 30 inches of rain (9 trillion gallons of water, enough to fill the entire Great Salt Lake in Salt Lake City — twice) has been dumped on the Greater Houston area and Southeast Texas. It is a disaster of unprecedented magnitude, and at press time, it is still not over.
Only in weeks and months to come will the true scope of the destruction be revealed as the flood waters recede, and it will take far longer than that for the Houston area to get back to anything remotely resembling normalcy. One thing, however, seems clear: the billions in losses incurred in Houston will surely rival or even exceed those of Hurricane Katrina.
The thing about unprecedented events is they have no precedent. But that doesn't mean we don't know what's going to happen next, for those who learned from Katrina and Sandy.
Once the roads clear and damages can be assessed, the need for adjusters will surely exceed the number of skilled professionals who are up the task. Adjusters will be pulled in from nearby states to help assess the damage — not all of them skilled.
As sure as death draws flies, shady contractors will be on the lookout for desperate homeowners and property owners to prey upon. And many, many folks will be taken advantage of, as these crooks demand payment up front for promised repairs that never happen — or, at best, are started and aren't finished.
Thousands of homeowners will be furious when they learn that their policy doesn't cover their flood losses. And that's the worst part of all, for an industry that already faces its share of reputational issues.
There's a very good reason why P&C insurers often aren't trusted by the general public, and this is a big part of it. The industry continues to fail in its responsibility to educate people about the exposures from flood, what's covered by their policy, and what isn't. Within the industry, that's something that is, for the most part, understood; but out in the real world, it isn't.
Don't tell me that it's a conversation that doesn't need to be had, that the risk is so low, that your client doesn't live in an area that could ever see a flood. The mindset around flood being primarily a coastal problem needs to change. The truth is this: You might not live in a primary flood area, but everyone lives in a secondary flood area. Everyone.
That is where the teaching moment comes in. Harvey must change the conversation around flood coverage between agents and brokers and their clients. It's not a topic that can be avoided any longer.
Likewise, this disaster must also elevate the conversation around the increased privatization of flood cover in this country. The National Flood Insurance Program (NFIP) is some $26 billion in debt. Even if Harvey serves as the catalyst for its reauthorization at the end of September (and that deadline is approaching pretty quickly, for a Congress more polarized than ever), the NFIP is not a long-term, sustainable solution. It's a politically complicated, worst-case solution to a greater problem that is only going to accelerate in years to come.
One of the provisions for Write-Your-Own insurers who participate in the program is that they cannot create their own competing coverage products around flood; they must use the standard form. They can administer the product on behalf of the NFIP, sure, but standard-market insurers who are best positioned to assume the right risks for the proper price are prevented from doing so due to non-compete clauses.
Ask yourself: How many Houston-level, unprecedented disasters need to be suffered before we shift flood risks where they really belong, and how long can you wait to breach the topic of flood coverage with your clients before the losses mount to levels above all of our heads?