A report from leading global property information company CoreLogic has highlighted the opportunities for private insurers to protect homeowners from flood risk inside and outside of the National Flood Insurance Program (NFIP).
After Hurricane Harvey in 2017, CoreLogic estimated that 70% of the flood damage was uninsured.
Dr. Howard Botts, executive and chief scientist at CoreLogic, says that since flood is not part of a standard homeowners policy, identifying these key areas of flood underinsurance can enable insurers offer policies that help homeowners recover quickly and keep communities strong after a disaster.
CoreLogic analysis also shows that uninsured damages from catastrophes are not only devastating to homeowners and insurance carriers but can threaten the overall mortgage industry.
“If a hurricane causes significant storm surge damage during a time when mortgage delinquencies are already high, this could result in additional issues for lenders and insurers – and ultimately, delay economic recovery for impacted communities,” said Dr. Frank Nothaft, chief economist at CoreLogic.
“For example, our analysis shows that three months after 2018’s Hurricane Florence made landfall, serious delinquency rates had doubled in major metros affected by the storm.”
Underinsurance figures are based on an analysis of increased reconstruction costs over a rolling two-year period for homes that are at High to Extreme risk of being destroyed or even partially destroyed in the event of a flooding disaster.
The estimates are also based on the assumption that a Category 3 to 5 hurricane damages an estimated 30% of at-risk homes’ RCVs, and inland flooding damages 30% of at-risk homes’ RCVs.