Wright Flood introduced their latest private flood program, FocusFlood, last August to a hungry market, and since then, the program has seen substantial growth.
We sat down with Patty Templeton Jones (President, National Flood Insurance Services), Mark Niess (Vice President, Private Flood), Laurel Thome (AVP of Private Flood), Michael Sloane (EVP and CMO) and CIO Tim Love, to talk about their successes and trials in launching FocusFlood.
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Can you first explain the difference between FocusFlood and ResiFlood?
Niess: When agents go on our portal to get a quote, they see several different options. We offer NFIP coverage, backed by the federal government – in fact, we’re the largest NFIP writer. Our portal also offers two other private flood options: ResiFlood and the new FocusFlood.
ResiFlood is mostly written on admitted paper, which limits its flexibility. It’s backed by two different carriers and then three different reinsurers and is currently available in five states. It’s been in existence since 2019.
FocusFlood is written on a non-admitted basis, backed by Lloyds of London and is supported by five different syndicates. It’s available in 19 states.
What gap in the market does FocusFlood fill?
Niess: Being on non-admitted paper, we’re able to offer coverages in geographical areas where the admitted market doesn’t necessarily want to play, due to exposures.
If it was an admitted product, we’d have to go through all the filings… and every state is different. But as a non-admitted product, we can adjust rates and look at location appetites. Literally we can pivot overnight to adjust to market conditions and the appetite of our reinsurance partners. This gives us much, much more flexibility than an admitted product.
Jones: NFIP was the only option for the last 50 years. We’ve seen private flood evolve over the years, but being non-admitted allows us to be able to adjust our premiums, our coverages, our underwriting guidelines. It enables us to grow the product little bit better, I think, because we can fine-tune it faster.
Thome: Private flood is still in its infancy as to product offerings, market expectations and acceptability. For a long time, lenders pushed back against private flood because they liked the security of the NFIP. They didn’t want a policy that was changeable or that had any amount of uncertainty. And when lenders wouldn’t accept private flood policies, obviously insurance couldn’t write them.
That changed around 2012, but there was still a mental reticence in accepting private flood. Launching ResiFlood, which was admitted, bridged a huge gap in the minds of lenders and agents. All of the ResiFlood states are admitted except for South Carolina and Virginia, our only two non-admitted states.
In spite of being non-admitted in those two states, ResiFlood was still a success. Market appetite was shifting with the realization that private flood is a viable alternative, and that we offer coverages that insureds wanted but didn’t exist in NFIP. While there’s still more uncertainty on private flood than exists within the NFIP, there are more coverages – expansive items that you can purchase. For instance, if you have other structures – not just a detached garage – or you have a basement or contents down in the basement, you can buy those coverages. NFIP might cover detached garages, but with ResiFlood, if you have other structures, you can purchase coverage a la carte.
Because ResiFlood was so successful in South Carolina and Virginia as non-admitted, we realized that this might be an opportunity to launch a non-admitted product more broadly, in more states. FocusFlood is now in 19 states. Our plan is to grow to even more states.
When talking with your carrier, what sold them on the idea of FocusFlood?
Thome: The granularity of pricing is what our carrier and syndicates really like.
Let me first explain how ResiFlood is set up. Imagine a giant grid placed over a state, chopping it into 30-by-30-meter territories. Because of these very small territories, pricing can be much more targeted toward the risk of flooding at that grid location: Is it negatively elevated? Is it on a mountain top? Is it near the ocean, etc.
The carriers really liked that because it wasn’t heard of at the time, even in regular homeowners policies, because it’s difficult to manage that many territories well.
But with actuarial help, we chopped up the states into tiny little grids, determining the elevation and exposure at the center of each grid, and then began to price the product. Your house and the house next door might have a completely different premium. The carriers really liked this more targeted risk approach.
And we only increased that granularity when we launched in FocusFlood. We discarded the 30-by-30-meter grids to use the precise lat/long (latitude/longitude) on the rooftop of a house to determine base rate including average annual loss at that location. It then runs through our rating algorithm to determine the full and complete premium.
We work with Lloyds of London on a couple of different products, so we went to them and said, “We’ve got this idea for our product, help us fill our dance card, help us find the syndicates that want to get behind this product.” And it was fully supported rather quickly by five syndicates.
Niess: Another point: In the flood space, nobody has a better reputation than Wright Flood.
When we began to talk with carriers about playing in our FocusFlood sandbox, our reputation as being one of the largest NFIP writers was a huge selling point. Also helping our buy-in is the fact that we can provide carriers our data on a daily, weekly, monthly basis, so that they know where their investment stands, where we have risks written, loss ratios, heat maps to show them concentration areas. This level of reporting to our financial risk-taking partners is unmatched. Our reputation was very, very key.
When did you start this process?
Thome: We secured carrier approval in 2022; in 2023 we built our product suite, then launched in August. It was a long time in coming, partly because we really wanted to get it right. It was a deep dive for our technology teams to get it built correctly.
We launched in 19 states simultaneously. It involved months of testing. Arrowhead Programs’ shared services teams – Data Science, Actuarial, IS, the PMO and many others – were a big help.
What key points did you have to work through?
Thome: Being excess and surplus, we have to be really careful. For instance, we must be compliant if we have to notify a California insured of certain things in print – and does it need to go with the quotes, the app or the deck page? So we must ensure we’ve dotted all the I’s and crossed all the T’s, making sure that we had taxes, fees, etc. correctly programmed in and computed in the right way on the backside for reporting purposes.
When flood coverage was first invented long ago, it was basically just $250k for the dwelling, $100k for the contents. And that’s it. ResiFlood came along and said, well, you might actually need other coverages. Maybe you have other structures or need Loss of Use or Ordinance and Law coverage. ResiFlood offers more a la carte options. If you don’t need it, you don’t have to purchase it. This is somewhat groundbreaking, because even in the typical homeowner space you might have a suite of built-in coverages, like other structures or contents, and you don’t get to necessarily remove one if you don’t need it.
FocusFlood also offers a la carte coverages, with the added benefit of higher coverage limits. Because we’re in the E&S space, a homeowner can have a bigger dwelling or more contents coverage.
Now that you’ve launched, what do you hear from your agents?
Niess: They’re very appreciative of the ease of quoting. When they go into our portal, they can see multiple products including NFIP. It’s almost like a comparative rater. They can see immediately what’s eligible and what’s not eligible.
Every month we get feedback from our regional sales managers, our flood experts out in the field across the country. They were delighted with the speed in which we’ve been able to pivot very quickly, vs. many carriers who take six months to a year to implement. And our agents have raved about that quick pivot.
Jones: We’ve had the pleasure of watching the private flood products grow and evolve, especially the hard work our teams have done with both ResiFlood and FocusFlood. We’re far cry from where we started to where we are today, in 19 states. It’s been a huge win.
Last thoughts: Every home is in a flood zone
Sloan: Everyone is in a flood zone.
Patty and I have worked virtually every major event for the last 20+ years, it is absolutely heartbreaking: 80% or more of the losses that occur are with folks who don’t have flood insurance. These homeowners end up having to borrow money or may get a small grant of about $6,000 from the federal government. But the average loss over the years has increased dramatically.
We used to see average losses of $15,000: now it’s well over $100,000. It’s not just homeowners who are affected, but also the community. It takes a long time for infrastructure to be rebuilt and for people to rebuild their homes. Many small businesses never recover after a flood.
You may not think you’re in a flood zone, but you are. As more and more roads and structures are built, there are fewer spaces for the water to run off. That can easily create a flood anywhere.