Tag Archives: Flood

Business Risk, Cyber Risk, Floods, Insurance Industry

RiskScan 2024 reveals risk priorities across the insurance marketplace

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By Mary Sams, Senior Research Analyst

Cyber incidents, changes in climate, and business interruption are the chief risk concerns among key marketplace segments in the insurance industry, according to RiskScan 2024, a new survey from Munich Reinsurance America Inc. (“Munich Re US”) and the Insurance Information Institute (Triple-I) reveals.

RiskScan 2024 provides a cross-market overview of top risk concerns among individuals across five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers. The survey explores not only P&C risks, but also how economic, political, and legal pressures shape risk perceptions. 

Methodology

To produce a compelling snapshot of cross-market views, Munich Re US and Triple-I engaged independent market researcher RTi Research in the summer of 2024 to survey 1,300 US-based individuals.

Market surveys typically focus on a single audience, but RiskScan 2024 is a multi-segment survey offering a comprehensive view of risk perceptions and yielding comparative results between audiences. The key insights present a variety of commonalities and disparities across the five distinct target segments, covering the full range of insurance buyers and sellers across the United States.

This online survey was conducted across gender, age, geographic region, household income, business revenue, and company size. 

Two primary cohorts make up five segments of participants in the RiskScan research:

  1. consumers and small business owners (n=700) and
  1. Insurance industry participants, which included carriers, agents, and brokers as well as middle market businesses (n=600). 

Research participants were presented with various risks across five segments and then asked to select their top three risk concerns. 

Key Insights

More than one-third of respondents chose economic inflation, cyber incidents, and climate change as their top three concerns based on insurance risks and market dynamics. All three of these reflect post-pandemic news topics. Economic inflation has increased over the last several years.  Consumers and small business owners have experienced direct impacts with increased costs and industry participants have seen these impacts on increased replacement costs and P&C insurance premiums.

There are significant disparities in the ranking results between the two primary cohorts within the research. Insurance professionals tend to identify a variety of risks and have significant awareness of all risk categories, including emerging technologies. As expected, these audiences exhibit broader knowledge and awareness of risk transfer and mitigation of new and emerging risks. Consumers identified a smaller number of risks associated with more immediate and direct impacts on themselves. 

The structure of RiskScan 2024 research yields a more complete understanding of the “white space” that exists between risk perception and action. The gaps were identified along three key risk areas: 

  • Flood risk
  • cyber risks, and
  • legal system abuse

Flood risk was also indicated as one of the chief concerns for each audience. However, consumers lack awareness that flood events are typically excluded from homeowner’s policies. Industry professionals are more aware of flood coverage exclusions, the importance of purchasing flood coverage before a flood event, and the likelihood of these events occurring.

Cyber incidents are a primary concern in all five market segments. Most audiences in the research, both consumer and commercial, feel unprepared as this threat vector is constantly emerging, expanding, and changing. Many people are knowledgeable about cyber risks and are concerned about how to mitigate new cyber threats. Troubling stories have come to light as the frequency and severity of cyber threats grow.

“The knowledge gap about insurance risks demonstrates the continued need for education of consumers and businesses, especially about flood, cyber, and legal system abuse,” says Triple-I CEO Sean Kevelighan. “Increasing knowledge will be instrumental for the collective work needed to better manage and mitigate future risks.”

The report includes additional results for each of the five primary audiences: consumers (n=500), small business owners (n=200), insurance carriers (n=200), insurance agents and brokers (n=200), and middle market businesses (n=200).

Download the full RiskScan 2024 report to review the details. Triple-I aims to empower stakeholders by driving research and education on this and other key insurance topics. Follow our blog to keep abreast of these essential conversations.

Coastal Property, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

Mangroves and Reefs: Insurance Can Help Protect Our Protectors

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Hurricanes and storm-related flooding are responsible for the bulk of damage from disasters in the United States, accounting for annual economic losses of about $54 billion, according to the Congressional Budget Office (CBO).  

These losses have been on the rise, due, in large part, to increased coastal development. More, bigger homes, more valuables inside them, more cars and infrastructure – these all can contribute to bigger losses. The CBO estimates that a combination of private insurance for wind damage, federal flood insurance, and federal disaster assistance would cover about 50 percent of losses to the residential sector and 40 percent of  commercial sector losses. 

Recent research illustrates the benefits provided by mangroves, barrier islands, and coral reefs – natural features that frequently fall victim to development – in terms of limiting storm damage. In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and dissipate storm surge. A healthy coral reef can reduce up to 97 percent of a wave’s energy before it hits the shore. Reefs — especially those that have been weakened by pollution, disease, overfishing, and ocean acidification — can be damaged by severe storms, reducing the protection they offer for coastal communities. 

In Florida, a recent study found, mangroves alone prevented $1.5 billion in direct flood damages and protected over half a million people during Hurricane Irma in 2017, reducing damages by nearly 25% in counties with mangroves. Another study found that mangroves actively prevent more than $65 billion in property damage and protect over 15 million people every year worldwide.  

A separate study quantified the global flood-prevention benefits of coral reefs at $4.3 billion.  

Such estimates invite debate, but even if these endangered systems provided a fraction of the loss prevention estimated, wouldn’t you think coastal communities and the insurance industry would be investing in protecting them? 

Well, they’re beginning to.  

The Mexican state of Quintana Roo has partnered with hotel owners, the Nature Conservancy, and the National Parks Commission to pilot a conservation strategy that involves coral reef insurance. The insurance component – a one-year parametric policy – pays out if wind speeds in excess of 100 knots hit a predefined area. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance pays claims when specific conditions are met – regardless of whether damage is incurred. Without the need for claims adjustment, policyholders quickly get their benefit and can begin their recovery. In the case of the coral reef coverage, the swift payout will allow for quick damage assessments, debris removal, and initial repairs to be carried out.  

Similar approaches could be applied to protecting mangroves, commercial fish stocks that can be harmed by overfishing or habitat loss, or other intrinsically valuable assets that are hard to insure with traditional approaches.