FloodFlash’s IoT sensor-powered parametric flood insurance solution is a prime example of the principle of Occam’s Razor – that the simplest solution is usually the most effective – in action. Speaking with Insurance Business, Richard Coyle (pictured), FloodFlash’s head of major accounts and capacity management highlighted how the efficacy of the product holds true not just on the smaller end of the market but also for the larger, more complex risk profiles of UK corporates.
Coyle, who joined the tech-forward MGA from Miller where he specialised in parametric insurance solutions, noted the scope of the flood insurance protection gap facing UK corporates – as revealed by FloodFlash’s annual survey of its broker partners and clients.
“14.4% of commercial property in Britain is deemed at ‘significant’ risk of flooding. Meanwhile, 54% of the risk managers and business owners that are worried about flooding agree that flood cover is quite hard to come by,” he said. “So, it’s clear that this is quite a large market issue where the businesses that most need flood insurance are actually struggling to find affordable coverage at the limits that they need to buy.”
Crucially, he said, the survey also revealed that UK corporates are not just struggling with the affordability and availability of flood insurance but also the types of coverage available. Many customers are unhappy with the long, drawn-out claims processes of traditional flood cover and the resulting business interruption. So, there is significant appetite for fast, parametric payouts that allow them to re-open quickly and limit the business interruption of an incident.
The flood risk landscape of UK corporates is markedly different to that of SMEs, Coyle said, not least because of the size and complexity of the exposures facing the former, which means the limit requirements they have are often substantially larger than those of SMEs. And while these businesses can look to leverage their purchasing power and long-standing insurer relationships, quite often they’re not able to buy at the limit they want.
“We quite often see corporates having to retain quite a large amount of flood risk within their business,” he said. “That could be done in a few different ways. They might be forced to take out large excesses or deductibles on their policy. Or, they might just have to face the prospect that they are underinsured for flood. A third way corporates can retain flood risk is if they’re big enough to have their own captive insurance company, and quite often we see captives retaining quite a high level of flood risk.”
Whichever route they’re taking, the MGA’s message to corporate customers and risk managers is clear – they don’t need to be retaining such a high-level of flood risk. FloodFlash’s mission is to offer a very specific kind of flood carve-out solution, he said, whether that’s by providing top-ups for the limits of a client’s traditional property policy for flood, or by providing captives with a form of facultative reinsurance through a reinsurance FloodFlash policy.
At its core, FloodFlash’s offering all comes back to accessibility and flexibility in application, an objective that underpinned the development of its sensor-based parametric product. As a parametric insurance provider, he said, FloodFlash explored a range of potential options to calculate the parameter of a flooding incident and trigger a payout.
Among those considered were river and tidal gauges - but in his time at Miller, Coyle had seen first-hand the degree of mismatch that can occur between the triggering of the policy and the actual resulting flooding at an insured’s location. The distance of the gauge from the flood site makes it difficult to accurately measure the severity of damage, which in turn makes this kind of policy a tough sell for insurance brokers.
Another option was that of satellite solutions for parametric coverage, which is particularly effective for sectors such as the agricultural industry. However, he said, when it comes to accuracy around flood depth at a specific and very defined location, what this solution has in broadness, it lacks in accuracy.
“So, for those reasons, we went down the IoT sensor route,” he said. “Because that allowed us to harness the reliability and accuracy of a tidal gauge but with a sensor on the specific property, so we could ensure that when your carpets are wet, you’re going to get paid out. But it also allowed us to combine that accuracy with the broadness of satellite solutions because our network of sensors works together to give a holistic overview of the risk landscape.
“It’s the best of both worlds. Our solution doesn’t need access to power, it doesn’t need Wi-Fi, it’s very self-sufficient and it can be installed in really any location. And the main thing that was critical to us when we were setting the business up all those years ago is that our proprietary sensor is also very affordable. Which, especially in our current economic environment, is a key consideration for UK corporates and SMEs alike.”
It’s a misconception that flood insurance solutions need to be complex or unwieldy in order to be effective at mitigating the flood risk impacting UK businesses. And for Coyle and the FloodFlash team, it has been rewarding to see how this misapprehension is lifting across the market as they engage in significant projects with key players across the UK power and utility space. The firm is keen to replicate those deals and to work with other large UK corporates, he said, and its broker partners are integral to making that ambition a reality.
“Brokers are at the heart of our distribution, as we’re a fully broker-distributed product,” he said. “And from a broker’s perspective, having a really innovative new product that resonates with their client base and allows them to plug underinsurance and coverage gaps, and provides a more efficient means of covering flood risk, is essential.
“Their support has been amazing, as is the vital link they bring between us and their clients. We work very well with our broker partners and we’re always looking to work with more. So, for brokers, if this offering resonates with you and your clients, I’d encourage you to get in touch.”
