Hurricane damage – wind or flood and why it matters

The 2024 Atlantic hurricane season has already begun. Hurricane Beryl was the earliest Category 4 Atlantic hurricane on record, bringing devastation to some Caribbean Islands. This was before it was upgraded to a Category 5 storm with 165 mph sustained winds, making it the strongest hurricane ever this early in the year for the Atlantic basin.

This was just the start of what has been forecasted to be a busy year, as the Pacific transitions from warm El Niño conditions to cooler La Niña temperatures, which is typically a driver of increased hurricane activity.

As a result, Colorado State University has predicted as many as 23 named storms, 11 hurricanes, and 5 major hurricanes in their pre-season forecast, all of which are above the long-term average recorded between 1950-2023.

Although most people are acutely aware of the dangers of a busy hurricane season, particularly in more traditionally vulnerable areas such as Florida, this does not always mean they have the necessary insurance coverage in place to ensure a smooth and speedy recovery when disaster strikes.

Wind vs flood

For homeowners in the US, a major contributor to this issue is the complex policy definitions of insurance covering whether losses were caused by wind or flood damage.

Given that hurricanes by their very nature can wreak both wind- and flood-driven destruction, the highly specific parameters that the insurance industry tends to attribute to either wind or flood damage can create significant confusion, delays and even unnecessary legal issues.

Consequently, this can mean policyholders find themselves unprotected and insurers can be faced with complex, time-consuming claims processes as they try to verify the validity of claims by establishing the proximate cause of property damage. 


Identifying the problem

Typically, standard home insurance policies in the US will cover damage caused by wind, but not damage caused by floods.

There are, however, exceptions in areas of greater vulnerability, such as disaster relief funds like FEMA’s National Flood Insurance Program, which protects 23,000 participating communities.

This is the US’s largest single-line insurance program, providing nearly $1.3 trillion in coverage against flooding.

Given how easy it is for hurricanes to cause significant damage to properties, being able to recover from their effects is of paramount importance. This is why, in their immediate aftermath, it’s vital to be clear about the cause of any property damage, to ensure that resources can quickly be provided to support those in need.

Firstly, it’s important to explain the distinction between wind and flood damage by discussing the behavioural patterns that are typically attributed to them when insurers send adjusters out to assess claims.

Top-down wind damage

Understandably, wind damage tends to go from the top down, affecting things like roofs, windows, walls, and power lines. It can also throw objects around that have the capacity to cause damage, which is why in places like Florida people are advised not to plant tall trees around their property or have other potential projectiles nearby which could damage their properties and affect their claims if there is evidence of any kind of negligence.

Bottom-up flood damage

Conversely, flood damage goes from the bottom up, where even just a few inches of water could mean thousands of dollars’ worth of damage as basements and ground-level floors become submerged. Floods can also rip out houses’ foundations, destroy possessions, and affect infrastructure like electricity and plumbing, so the insurance should cover both property and possession damage, making it inherently more expensive.

Of the two, it’s indisputable that flooding has the greater capacity to cause severe damage to properties, given that it was the second biggest driver of insured losses in 2023, after severe convective storms (SCS) were the primary driver of insured losses, accounting for an $52 billion in the US alone, according to Moodys.

Naturally, this is why it’s more expensive to take out flood insurance. However, flooding is not included as standard in many US homeowners’ insurance policies, and because wind can drive flooding, this adds another layer of complexity to this prevalent industry challenge.

Ultimately, being insured for both wind and flood damage is a necessity in hurricane-prone regions, yet a significant protection gap remains. The potential for people to have their properties decimated by hurricanes, without the right policies in place to protect them, is a major issue.

What’s the answer?

As people look to financially recover post-hurricane, many claims will come in and insurers will typically have to spend considerable time and money assessing their validity. Internal teams often work in a siloed fashion as they look to deal with both wind- and flood-driven damage claims, attempting to secure the necessary resources to send adjusters out and quickly settle payments.

To ensure both the protection of policyholders and insurers, solutions now exist that utilise both AI technology and human intelligence to provide both wind and flood damage assessments. This enables insurers to quickly understand the effects of both perils on properties in their portfolios, allowing them to make calls on reserving and pay claims faster and with greater accuracy.

The provision of these multi-peril damage assessments ensures that claims teams can work together to evaluate claims, as they’ll be able to know which areas are most affected by the different perils, ensuring resources can be appropriately allocated and that the claims process can be expedited.

New actionable insights

Further, actionable insights are now available into insurers’ total exposure from both perils at a portfolio, policy, and property-level view, within hours and days of an event taking place. These enable rapid responses and accurate, building-level assessments, so insurers can make the same, informed decisions as if they were on the ground in the immediate aftermath of an event, without needing to commit further time and resources to actually be on-site.

For example, damage assessments like this enable insurers to identify high-loss lines of business, such as hotels with roof damage where water ingress causes not only physical damage but significant business interruption, so expected claims from these specific sites can be prioritised to mitigate the potential loss.

The devil is in the detail

It’s also now possible to highlight properties with basements that have been impacted by flooding, which allows decision-makers to proactively provide relief by deploying water pumps to restrict further damage and mitigate losses.

Further, by utilising human intelligence experts it’s now also possible to provide damage assessments showing a depth of coverage which AI in isolation cannot, such as pointing out high water lines and other evidence of flooding, after a flood has subsided.

With such detailed insight into how each peril is causing damage to affected areas, insurers can be proactive in their communication with policyholders who have only been impacted by flooding to provide coverage information, reducing the costs and complexity of handling non-covered FNOL calls.

A win-win for insurers and customers

Within 24 hours of a hurricane, this approach can clear up any confusion between wind- and flood-driven damage, creating clarity for both insurers and their customers. In this way, insurers can keep their promises to policyholders with valid claims and interim payments for additional living expenses, without the need for time-consuming, resource-intensive visits from adjusters.

By Matthew Patience, senior client solutions manager, McKenzie Intelligence Services