Just call me The Amazing Mazzo. We weren't peering into a crystal ball last month when we wrote about the need to reauthorize the National Flood Insurance Program (NFIP), but we might as well have been. As of this writing, six states are still bailing out from severe storms and flooding that have killed 24 people, injured 148, and caused more than $1.5 billion in estimated damage in Iowa alone–a figure that's likely to increase as more storms are predicted and river levels continue to climb. (I had litter boxes floating in my own basement when storms struck and ComEd failed to restore power for the next 20 hours, but that's another, much less compelling story.)

Unfortunately, property damage is only part of the insured loss picture in the Midwest: Economists also are concerned about the potential for crop damage losses. Insurers like Ace Limited, a large provider of multiperil crop insurance, and Wells Fargo Group, the second-largest U.S. provider, could be on the hook for millions.
Insurers tend to love the Midwest because of its relatively placid weather patterns. While we do get our share of tornadoes in the summer, it's nothing compared with the kinds of risky weather seen in coastal areas. Still, we sometimes forget that a really big river runs through a lot of the “safe” Midwest, and even little rivers can get nasty if there's enough rain. And now we're seeing news footage from Iowa City and Cedar Rapids showing us what looks a lot like the devastation we saw three years ago on the Gulf Coast.
That's why it surprises me that so many people living with the Big Muddy in their front yard arbitrarily decide they don't need flood insurance. Although FEMA estimates that some form of flooding occurs in every region of the U.S., the Insurance Information Institute tells us that only 17 percent of Americans have a flood insurance policy. Was 1993 really all that long ago?
This fact is backed up by Terry McDonald, a self-described “hometown agent” at AW Welt Ambrisco Insurance in Iowa City. (Listen to a PodCast with Terry here.) We asked him how his agency was holding up in the wake of the flood, and were surprised to learn that even with a huge reservoir in nearby Coralville, most businesses and residents choose to forego flood coverage.
“I'd say that less than 1 percent of our clients have it,” he said. “We just saw a claim where somebody paid off their home, ended the mortgage-mandated flood coverage, and now have a total loss.”
In cases like this there's also another threat of loss–that of agent E&O. Because Iowa is a “failure to procure” state, and case law requires the insured to specifically ask the agent for coverage, it's not likely that Terry's agency will face a lawsuit. Still, given the negligible number of policyholders with flood insurance, the agency has put its E&O carrier “on notice” just in case someone decides to sue.
This month's bad weather is just what the P/C industry didn't need, what with sources like Fitch and others predicting “significant” reductions in profits and return on surplus for the year. And fasten your seatbelts–hurricane season began last month (listen to a PodCast on hurricane predictions here).
One possible sign of light at the end of the tunnel: MarketScout reports that commercial P/C rates dropped an average of 11 percent in May, compared with 13 percent in May 2007. Can we be hitting bottom? That's not a prediction I care to make.
From the mouths of babes
One of our hot-button issues is how insurance tends to lag behind other industries in matters of automation and technology (AAB “Agency Technology” columnist Tom Baker says when it comes to technology, dealing with the insurance industry is like a nice trip back into the 1950s).
Now an interesting new study of the “millennial generation”–the estimated 80 million Americans born between 1981 and 2001–shows that not only do these people expect to fully utilize new and innovative technologies in the workplace, but they also demand these technologies as insurance consumers.
Respondents to the Insurity/Microsoft “Millennials in Insurance Survey 2008″ said they expect their employers to provide the types of technologies they're accustomed to in their personal lives. These included PCs (76 percent), mobile/smart phones (48 percent), internal company instant messenger (50 percent), social networking sites (40 percent), company intranet/portals (62 percent) and company-provided virtual meetings (42 percent).
As insurance customers, millennials expect high-tech service, including personal Web portals with full account views (86 percent), Web-based support (89 percent), live online chats with agents (76 percent), instant messaging with agents (67 percent), company blogs to post concerns and questions (69 percent) and mobile alerts (59 percent).
Not surprisingly, the millennials responding to the survey perceive insurance as a dinosaur industry: 58 percent thought of insurance as having “older workers,” 63 percent said insurance was “old in general,” 53 percent said it is “not innovative,” and 65 percent said insurance has a “poor public image.”
None of this should come as a surprise to followers of The Amazing Tommo's columns. Still, it's a wake-up call for an industry that desperately needs to recruit younger workers (60 percent of our employees are over age 45).
And if the millennials' demands seem unreasonable, think about how you've come to rely on all the conveniences of technology. I'm no millennial, but when it comes to automation, I'm with the whippersnappers.

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What's Going On: Watching the rivers flow

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