Commentary: Flood Sales 101-Fact vs. Fiction

• I don’t need flood insurance; I’m not in a flood zone.

• I don’t need flood insurance; this neighborhood has never flooded.
• I don’t need flood insurance; Uncle Sam will buy a new house for me if mine is flooded.
• I don’t need flood insurance; my homeowner’s policy is enough.

Undoubtedly, at some point in your career, you had sales training that taught you, “If you didn’t make the sale, you didn’t overcome all the objections.” Flood insurance is no different. Customers can give a variety of objections when you bring up the subject. The truth is, though, that most consumers don’t really know the facts about how important flood coverage is. Know these important facts and you’ll be equipped to close the sale.

Objection #1 – I don’t live in a flood zone
Everyone lives in a flood zone and every state in the U.S. has experienced flooding in recent years. A low-risk zone isn’t a no-risk zone. Believe it or not, one in four flood claims come from areas classified as low or moderate risk. And, it only takes one flood to devastate a family’s finances.

Objection #2 – My neighborhood has never flooded
When it comes to flooding, history may repeat itself-or it may not. Just because an area hasn’t flooded before, or recently, doesn’t mean it won’t. Urban development reduces the land’s natural ability to absorb water. Runoff can multiply as much as six times when land is paved over. Weather patterns are constantly changing, too. Customers who count on history as a reason not to buy flood insurance are gambling with their homes and possessions.

Objection #3 – The government will pay for it
Many consumers think that Uncle Sam will automatically provide disaster aid if their home is flooded. He won’t. Federal disaster aid only becomes available when the President declares a disaster-and only one tenth of all U.S. disasters qualify. Even if a property owner can get federal aid, it’s normally in one of two forms:

• Grants – Sometimes it’s a grant, averaging about $2,500. Ask your customers how far that would go in replacing their homes or possessions, or both!

• Loans – The other form of federal aid is a loan that must be repaid with interest.

Example-
Let’s say John Homeowner gets a $50,000 loan from the government to help rebuild his house. His payment on that loan could be about $370 a month for 20 years. That comes to over $4,000 a year. On the other hand, the average flood insurance policy costs about $350 a year. Just doing the math for your customers may help you close the deal.

Objection #4 – Homeowners insurance is enough
No it’s not. Homeowner’s policies normally don’t cover flood losses. Look at it this way: how would your customers react if you told them their homeowner’s policy didn’t cover losses from fire? They’d probably insist that you add fire coverage. And yet many of those same customers will let their property remain unprotected against flooding. The fact is, a home in a high-risk flood zone is: more likely to be flooded than damaged by fire more likely to be flooded than burglarized more likely to be flooded than have a car stolen.

Armed with these facts, you can use a variety of strategies to help you make the sale.

Sales Strategy #1
Offering flood coverage with homeowner’s coverage is a natural combination. Many agents have increased flood sales significantly by automatically offering a flood policy when they sell or update a Homeowners policy. It’s a disservice not to offer a customer flood coverage and a huge E&O risk.

Sales Strategy #2
Preferred Risk policies for properties in low-risk zones represent a market that agents often overlook. The low rates even provide a built in selling point. Tell customers in low-risk areas how lucky they are that flood premiums start at just over $100 per year. Explain that customers in other areas of town are paying much higher premiums.

Sales Strategy #3
Help customers focus on the cost of replacing their property rather than on the cost of the policy. You can illustrate this by adding up the estimated costs of replacement and repair after a flood. Then, compare that total to their flood premium.

Example-
The national average flood claim is $15,000, while a flood insurance policy averages just over $350 a year. Ask your customers if they know of any other investment that delivers that kind of a return.

Sales Strategy #4
Another important selling point about flood insurance-like all insurance-is peace of mind. This is especially critical for customers who see flood coverage as an unnecessary expense…like the customer whose home is located in a so-called non-flood area or whose mortgage is paid up so there’s no lender requiring them to buy flood insurance.

Sales Strategy #5
Don’t forget your commercial clients. This is an area with huge potential and is often overlooked. Business owners are just as vulnerable as homeowners. Their other policies generally will not protect them against flooding. You have to ask them the question, “Can they afford to self-insure in the event of a flood?”

Remind your customer that insurance isn’t like most other purchases, say a car or computer. It isn’t something you buy to use; it’s something you buy and hope you won’t use. Point out that what the customer is buying is protection against financial losses and the ability to replace property and possessions damaged by flooding. Direct the customer’s attention away from the cost of the policy and focus instead on the security of being able to replace what might be lost.

And, don’t forget to offer flood coverage to your customers who live in condominiums or rental properties. They may not be aware that they can purchase contents coverage to protect their possessions.

Additional selling opportunities
What if you’ve presented all the facts, and covered all the selling points, and your customer still declines flood insurance? Does that mean you’re never going to sell that customer flood coverage? Not by any means. Here are some ways to encourage your customers to reconsider purchasing flood insurance:

Have the customer sign a waiver – Whenever clients reject flood coverage, ask them to sign a waiver form indicating their decision. This has two benefits: first, it gives clients another chance to rethink the risk they’re taking and second, it protects you if an E&O claim should arise.

Follow up after 30 days-Make a follow-up call about 30 days after a client has declined flood insurance-particularly if customers have just bought a new home and declined coverage at closing. This gives them time to get out from under the stress of closing and moving. It’s a good opportunity to encourage them to re-evaluate the importance of protecting that new home.

Monitor potential and actual flooding-Monitor long-range weather predictions for your area, as well as any flooding in nearby communities. Stay abreast of the latest projections for hurricanes and tropical storms. Weather events and long-range forecasts can create chances for you to call your customers, remind them of the 30-day waiting period on new flood policies, and encourage them to protect themselves while they have the chance.

The value of selling flood insurance
Selling flood coverage in conjunction with a homeowners policy builds customer loyalty. When customers have more than one policy with an agency, they are less likely to shop other agencies for lower premiums. And, writing a flood policy for a homeowner customer increases your overall book of business with a minimum of effort because you’ve already obtained most of the informa-tion you need.

Example –
Let’s say your agency has 100 flood policies with an average premium of $500 each. 100 X 500 = $50,000; then “15% X $50,000 = $7,500”

That generates a total premium of $50,000. At 15 percent commission, your income is $7,500. And generating that $7,500 doesn’t make major demands on your time and staffing. Flood is easy to write, particularly if you already have the basic information from the homeowners policy.

Another big plus is that flood policies have a very high retention rate and are very low maintenance. Renewing them is simple; they rarely have to be reworked at renewal time. Over a period of a few years, a strong book of flood business can create a solid, cost-effective income stream for your agency.

Salesperson vs. consultant and partner
Selling flood coverage not only protects your customers, it offers significant benefits to your agency, too. When you take a proactive role in helping your customers get the protection they need for their property, you’re more than a sales person; you’re a consultant and partner. Even if they don’t purchase the policy, they’ll still see you as a valuable professional who helps them make informed decisions.

Additional flood resources
If you would like more information on floods or flood insurance, visit
www.floodfacts.com. Here you will find feature articles, consumer tips, reference materials and much more. As the largest Write-Your-Own flood carrier serving independent agents, Bankers’ is continually launching new efforts to help individuals, families and businesses protect their property and avoid potential loss. You can also contact Bankers direct at 1.800.627.0000 extension 4900.

Melanie Ross is a Market Analyst for Bankers Insurance Group and a licensed Property and Casualty Insurance Agent. She regularly writes for a variety of national insurance publications and websites. For more information, Ross can be reached at 1-800-627-0000, extension 4128. Or send comments to mcross@bankersinsurance.com.

Topics Agencies Flood Property Homeowners