The Risks of Hazard takes a great interest in the protection gap because it is both an opportunity for underwriters and a shortcoming of insurance as an industry. Last week, Insurance Journal published a very informative look at the U.S. residential protection gap from a novel perspective: the policy holder’s perspective.
The insurance aspects of the protection gap are well documented, including how to write in the flood protection gap, what it looks like, and how it compares to emerging risks. But it is surprisingly rare to read about what that means to the policy holders. Happily, the Big I and Trusted Choice did some homework, and the results are stark.
Here is what the protection gap looks like to US homeowners:
- More than 40 percent of those surveyed don’t have or don’t know if they have coverage that will fully replace their belongings and home in the event of a disaster.
- At least 28 percent of homeowners polled do not have enough savings to support their households for even one month after a disaster if they had to leave their home.
- At least 73 percent of respondents don’t have a flood insurance policy.
- Those that do have a flood policy have no coverage for off-premises living expenses (i.e. loss of use).
These findings move the conversation from an underwriter’s opportunity to the lack of support for homeowners should the worst happen. The protection gap is real.
While there is no moral obligation on any insurer to issue coverages to one and all, the combination of a clear commercial opportunity that serves society in such a positive way does create an attractive business model. As makers of underwriting analytics that enable this type of business, we at the Risks of Hazard strive to help fill the protection gap.