The weather gauge

Of those surveyed, 59% of homeowners do not perceive they will be impacted by severe weather in the next ten years. Even more concerning, 25% do not think they will ever be impacted. 

Extreme weather events can strike anywhere, at any time. In the last five years, 90 weather events occurred in the US — each resulting in over a billion dollars in damages.¹ In the first nine months of 2022 alone, the US experienced 18 separate billion-dollar weather and climate disasters.²

Preparedness starts with education: Everyone needs to recognize the urgency to adapt to extreme weather now. By acknowledging the potential risks, they can take proper steps to mitigate them. 
Munich Reinsurance America., Inc. ("Munich Re US") offers community-based solutions to help bridge the knowledge gap, encompassing risk education to risk transfer. Our solutions include education and training on extreme weather and its impacts, tools and data analytics that show the changing risk landscape, public private partnerships to strengthen community preparedness, and innovative risk transfer solutions.

The good news: Most homeowners (88%) do have homeowners insurance, due to mortgage lender requirements. More alarming is the remaining 12% who do not have coverage. 

In our survey, 48% of uninsured homeowners have a household income of less than $40,000 per year. At lower income levels, homeowners insurance may be viewed as a discretionary purchase. However, extreme weather does not discriminate by income, and low-income homeowners remain at risk. This insurance protection gap equals billions of dollars in losses each year. In 2022, only $94 billion of the $148 billion economics losses due to natural disasters in the US were insured, leaving a gap of $54 billion in uninsured losses.

Nationally, over half of homeowners believe thunderstorms (including lightning, floods, and tornadoes) to most likely result in an insurance claim. This belief appears to be accurate, and aligns with the data that thunderstorms are the most common and damaging natural catastrophe in the US.³ On average, over the past ten years (2013 – 2022), flooding caused more than $7.8 billion in economic losses each year.⁴ 

Although homeowners correctly identified thunderstorms as the top weather risk, most do not realize the level of risk and destructive power of flood waters alone. According to FEMA, flooding is the most common natural disaster in the US. Between 1996 and 2019, 99% of US counties were impacted by a flooding event.⁵

Anywhere it can rain, it can flood, yet only 22% of the homeowners in our survey believe they are at risk of being impacted by this destructive peril.⁶

Additionally, many consumers are not aware that flood coverage must be added or endorsed onto their homeowners insurance policy — it is not covered by the basic policy itself.

Our survey revealed that of those who perceive they are at risk of flooding, 78% have purchased flood insurance. This points to the fact that it is critical to educate consumers not only about flood risk itself, but also about obtaining proper coverage for this risk. 

In the past, many people did not realize there was more than one option for flood protection. Today educated consumers appear to be more aware of the different flood insurance options. As demonstrated by our survey, out of all the homeowners who purchased flood insurance, 48% purchased from the National Flood Insurance Program marketplace and 52% purchased from private insurers. According to the National Association of Insurance Commissioners data compiled by S&P Global Market Intelligence, in 2020, net premiums written for private flood insurance totaled $302.4 million.⁷

Munich Re US personal lines flood endorsements are designed to narrow the protection gap by offering affordable flood insurance developed specifically for homeowners in low-to-moderate risk areas. Our turnkey Inland Flood endorsements offer expanded coverages that can easily be added onto existing personal lines policies. 

Purchasing proper insurance coverage is just one step homeowners can take to help create a resilient home. While a homeowner cannot predict or control severe weather events, they can play a crucial role in protecting their home against them.

Across the US, 40% of homeowners report they have taken steps to better protect their home, however, 60% say they have not completed any steps to make their home more resilient. 

Respondents were asked about resilience-related home improvements they have made to protect their home. Half of the respondents have made some type of resilience-related improvements, while 50% have not.

The top two home improvements cited in the survey were:

1. Installing smart sensors and cameras to monitor for damages
2. Using new building techniques to fortify roof, windows, doors, and walls

As part of the team, insurance providers should educate homeowners about the importance of resilience and the measures they can take to better protect their homes and ultimately reduce losses. Along with the insurance industry, policymakers, homeowners, and communities can all take steps to help reduce the impact of extreme weather events. Mitigation efforts can help protect lives, improve safety, prevent property loss, and decrease disruption of daily life. Society can realize a monetary return on this investment in resiliency. According to the National Institute of Building Sciences⁸:

• Mitigation saves $13 per $1 invested 
• Adopting latest building code requirements saves $11 per $1 spent  

Munich Re is committed to driving extreme weather awareness and resilience forward.

*Munich Re (includes all subsidiaries of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München)

The 2023 Q2 Consumer Survey-Homeowners Perception of Weather Risks was conducted by the Insurance Information Institute in coordination with Munich Reinsurance America, Inc.
The Insurance Information Institute name, as reflected on this website, is used with consent.
 

Footnotes: 

¹ National Centers for Environmental Information. Billion-Dollar Weather and Climate Disasters. Retrieved April 20, 2023, from https://www.ncei.noaa.gov/access/billions/events/US/2018-2022?disasters 
² National Oceanic and Atmospheric Administration. U.S. hit with 18 billion-dollar disasters so far this year. Retrieved April 20, 2023, from https://www.noaa.gov/news/us-hit-with-18-billion-dollar-disasters-so-far-year
³ National Weather Service. Thunderstorm Hazards. Retrieved April 20, 2023, from https://www.weather.gov/key/tstmhazards  
⁴ NatCatSERVICE, Munich Re, retrieved 7/13/23
⁵ FEMA. Mapping the risk – Flood map modernization. Retrieved April 20, 2023, from https://www.fema.gov/pdf/about/regions/regionv/faq_east_stlouis.pdf
⁶ FEMA. FEMA’s Community Rating System Program Rewards Flood Risk Reduction. Retrieved April 20, 2023, from https://www.fema.gov/press-release/20210318/femas-community-rating-system-program-rewards-flood-risk-reduction
⁷ Insurance Information Institute. Spotlight on: Flood insurance. Retrieved April 20, 2023, from https://www.iii.org/article/spotlight-on-flood-insurance 
⁸ National Institute of Building Sciences. Mitigation saves up to $13 per $1 invested. Retrieved April 20, 2023, from https://www.nibs.org/files/pdfs/ms_v4_overview.pdf