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Brokers are being encouraged to discuss flood mitigation strategies with their clients after one senior insurance figure said Australian businesses are seriously underestimating their true exposure.
“Many people don’t choose to adequately understand their exposures, the likelihood of risk or the potential impact,” says Lynette Schultheis (pictured), senior vice president and operations manager at FM Global. “Flood exposure comes to mind for Australian businesses.”
Despite being the costliest of all-natural hazards from a recovery perspective, Schultheis says she regularly sees businesses turning a blind eye when it comes to their 500-year flood exposure.
Part of the problem, she suggests, comes down to a misunderstanding of what the term really means.
“Often there is the misconception that this type of event will only happen once every 500 years, which is not the case,” Schultheis tells Insurance Business.
A 500-year flood event has a 1 in 500 chance of occurring in any given year. In 2017, Hurricane Harvey was the third 500-year flood event in three years to hit Houston, Texas.
When asked what FM Global is doing to help alleviate the issue, Schultheis pointed to the insurer’s Flood Map, which gives decision-makers data on moderate and high-risk flood zones around the world – including Australia.
“Anyone – not just our clients – can use it to gain a better understanding as to whether or not a potential flood exposure exists at their current sites, key suppliers’ sites as well as any future sites,” she says. “All you need is an address.”
Schultheis also says permanent and temporary flood protection, as well as a good flood emergency response plan, are all effective ways of reducing flood loss.
“We work with our clients to provide permanent or temporary solutions depending on the risk,” she says. “Our engineers work with our clients in developing flood emergency response plans tailored for their individual locations, based on a thorough assessment of the risks posed and the role that location plays in their operations.”
Of course, education also plays a critical role in reducing denial and Schultheis says brokers and insurers should both be investing in the area to help end clients.
“Education is highly important but it’s not easy for customers to do this alone,” she says. “The more we can help people understand their insurance policy and what measures they can take to reduce risk before a loss happens, the better the whole industry will become.”
