Innovative insurance firm competes, partners with government on flood coverage

Second only to life insurance, flood insurance is probably the insurance product most people, particularly Floridians, would least like to think about. As the nation saw in 2017 with Hurricanes Harvey and Irma, last year with Michael and just this month with Dorian, rampant flooding is one of the most dangerous, destructive punches Mother Nature can throw.

It’s odd, then, that there’s little competition and innovation in the private sector for flood insurance customers. But Jim Watje, senior vice president of St. Petersburg-based Wright National Flood Insurance Services, a subsidiary of Daytona Beach-based Brown & Brown, says it’s not that unusual, considering the market is dominated by the Federal Emergency Management Agency’s National Flood Insurance Program (NFIP). Government basically takes out everyone else. 

FEMA “is a difficult competitor,” he says, “because it doesn’t act like a for-profit entity. There are some companies that would hesitate to get into the market because they fear the NFIP would have some type of unfair advantage against a for-profit entity. That’s been the historical perception.”

Wright, however, adopted a 'if you can’t beat ’em, join ’em' mentality to FEMA and the NFIP. Wright National Flood Insurance, Watje says, is the nation’s largest writer of NFIP policies and even issued the first NFIP policy when the program launched 50 years ago. “We see them as a partner, not a competitor.”

“We want to make sure that this is a market that’s sustainable over time and that we have responsible competitors.” Jim Watje, senior vice president of Wright National Flood Insurance Services in St. Petersburg

That partnership-like model took a big step in early September. That's when Wright launched a customizable residential flood insurance product, underwritten by Chicago-based Zurich North America, it says is an improvement on the NFIP’s “one size fits all” approach.

A core challenge for the new product: Will it be able to make headway in a market that can shift according to the whims of Congress?

For 20-year insurance industry veteran Watje, 59, the answer is affirmative because Wright, even while competing for insurance policy dollars with FEMA, is simultaneously helping to solve a problem the government itself has identified.

Last year, FEMA announced a “moonshot” goal of doubling the number of U.S. properties covered by flood insurance by 2023. According to the agency’s estimates, some 81% of Houston-area homeowners outside the city’s high-risk flood zones had no flood insurance when Harvey wreaked more than $125 billion in damages. Many of those people saw their homes ruined but received only a pittance from federal disaster relief funds.

“The goal is to double the number of consumers who have flood insurance,” Watje says, “not double the number of policies in the NFIP.”

Watje says a private, competitively priced flood insurance policy that offers flexibility similar to other personal lines of insurance, like home and auto, can be a difference maker in that niche space. So far the Zurich product is available only in Florida, but Wright, which has about 200 employees based in St. Pete, plans to roll it out in 11 additional states by the end of 2020.

The company. meanwhile, has no plans to stop writing NFIP policies, which it does in all 50 states and Guam. That’s because one of the biggest challenges for a company that deals only in flood insurance is the risk of being tarnished by unethical competition — companies that heavily discount NFIP policy prices but don’t provide adequate coverage. Wright, Watje explains, wants to lead by example — not cut and run when disaster strikes.

“We always have concerns about that,” Watje says. “We want to make sure that this is a market that’s sustainable over time and that we have responsible competitors.”

A misconception in the marketplace the company faces, meanwhile, is flood insurance is difficult to obtain. Wright’s new product puts the lie to that, Watje says. It doesn’t require a waiting period or an elevation certificate, and its dwelling limits are higher than the NFIP’s standard $250,000.

Another obstacle to growth is customer education. “A lot of consumers ignore their exposure” to flood risk, Watje says, “because they don’t think they’re exposed to it. But Mother Nature doesn’t look at lines on a map and determine where the water goes. And so our task is education as much as it is selling.”

Educational efforts must also extend to real estate agents, banks and mortgage lenders, adds Watje.

“They’ll say, ‘You’re not in a mandatory flood zone, so you don’t have to worry about flood [insurance],’” he says. “All that does is set the consumer up for heartache.”