Because Parametric Insurance is a game changer....
… for flood mitigation take up.
Why? Because it allows the property owner to set their own damage payout amount based on a range of criteria.
1. What did the last flood event cost me (or my insurer)?
2. If you are a commercial property owner this cost should include your business continuity payout amount. How much did my insurer pay me for loss of business revenue until we reopened. This amount can be far in excess of the flood damage costs.
3. How high was the flood? Could the next flood be higher?
4. Is it possible to prevent the flood entering my property?
5. If not, are there measures you can put in place to mitigate this loss, that will allow you to reopen your business sooner?
6. Can you afford the premiums on your current conventional flood insurance policy?
Let's look at an example
Depending on a property’s construction, it should be possible to protect it to a flood height of 600mm.
You can’t, however, guarantee you have found all ingress routes and there might be some leakage that you manage with some pumps.
You decide the damage in your property at this flood level will be minimal and you set a damage level at $20,000.
You also plan for a higher flood that will overtop your installed defences and overwhelm your pumps and decide the damage may be as high as $100,000.
You state these damage levels to your parametric insurer and issue a premium. If you think it is too high, you can adjust your higher damage level to reduce the premium, but it may leave you underinsured. A risk you might be able to reduce in subsequent years.
You can’t protect your property to this higher flood by building higher defences, but you can make your property more resilient by taking steps internally to make it easier to recover from the next event.
These steps—covered in my FloodRecover3R strategy—will allow you to spend the $100k payout on making your property more flood-resilient. Focus on the critical infrastructure within the property and spend as much of that money as possible to achieve this goal.
Remember: Parametric Insurance pays out within 48 hours, so you can start your repairs as soon as the rip-out and drying processes are complete.
You may not be able to protect your property entirely, but you will have reduced your risk and be able to set your damage level at a lower cost.
Maybe you can now set that level at just $5,000 and reduce your insurance premiums further.
