EP 26: The Importance of Expanding Flood Coverage To Homeowners: A Conversation with Rick Tighe of NFS

We are now in the heat of the hurricane season, so there are a lot more property owners, brokers, and insurance professionals who are thinking about and worried about flooding. Yet, as discussed in this episode, everyone is in a flood zone. You can live in a desert or upon a hill, like Ellicott City, MD, and be exposed to major and catastrophic flooding (see video here: https://www.youtube.com/watch?v=mLhYPUwUiG4 ).

In this episode, I spoke with Rick Tighe of NFS (National Flood Service) about their mission and how they are using technology to expand the take-up rate by property owners.

 

Watch here:

Connect:
Rick Tighe (LinkedIn)
NFS Homepage

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Transcript

Nick
And we're live back at the Coverager Podcast. I have my guest this week is Rick Tighe from NFS. We're going to be talking flood, we're going to be talking natural catastrophes, and that side of the business, which is funny, because before Rick and I started...so kind of ironic, I'm in flood, and I never talked about it. So in full disclosure, Rick is with a separate company. And so yeah, there might be some overlap between what his company does and what my company does, but we're both sort of in the same field and we might be bumping elbows, here or there, Rick, welcome to The Coverager Podcast.

Rick T
Yes, welcome, Nick and good afternoon and thank you for having me. Very excited to be here.

Nick
Of course, this conversation very near and dear to my heart. You know, it's my feelings about flood and just natural catastrophes, is that human beings just really struggle, trying to understand, you know, things that have low probability of occurrence, but potentially high severity. It's really hard to really get their hands around. So I think we're going to be spending a lot of a lot of our time in this particular episode talking about that, but I always start by allowing my guests to introduce themselves properly. So Rick Tighe. Tell us a little bit about you and NFS

Rick T
Sure, um, so I am the managing director of growth strategy for NFS and I've been with the company since January of 2020. Started January 2, actually, and I have 30 years of experience, past experience in an organization that follows focused on the property and casualty space. So I was a practice area manager for that company for 30 years and deep into sales and in driving sales organizations. But for NFS, what I do is I lead the client engagement team, which is the sales organization, which is the conduit to the carriers in the space. We also, I oversee the training and development organization, which is aligned to more than 70,000 potential agents out there that could potentially sell flood. And then I also have responsibility over the marketing department. And in marketing, we're doing things like brand awareness. We're doing flood education, both at an agent level and a consumer level. You know, as you're aware, Nick, on this is, you know, coverage, you know, for flood for Americans is as much of an education situation as it is an awareness situation. So we do a lot of work on just on awareness and education.

Nick
Yeah. And, you know, it's, it's a tough conversation to have. You talk to most agents or most brokers, and they struggled to have that conversation. So I, I think it goes a little bit like this. I think it goes a little bit like, Hey, have you considered flood insurance at all? OH I'm not in a flood zone! Right? And then there's like crickets, like the conversation kind of ends. And it's like, when you talk about education, I'm thinking, like, everybody needs education. We as professionals, the education, the brokers and agents that we're dealing with on a day to day basis, they need education, because how else are we ultimately going to reach the property owner who ultimately needs to know that flood can happen anywhere? Anytime, right?

Rick T
Right. Yeah. And it's it's it's a It's a conversation that we have internally within our organization. You know, we, we as NFS have, you know, you know, feel some responsibility to make sure that you know, coverage and awareness and and education is adequately distributed across the country. As you know, flood policies have a tendency to be bought or issued, you know, in the coastal communities. But, you know, Midwest America and spring flooding, you know, I think there were 128 million people at risk of flooding just for the spring thaw. And, and where that happens is Middle America, where people typically don't have those types of insurance products, or their agents are not even approaching them as you suggest about flood. You know, and you know, that those those types of awareness campaigns, those types of education opportunities that we have with agents You know, are are important to us.

Nick
Yeah,

Rick T
We tried to take passive agents and convert them into active agents. Yeah, you know, for a minute about

Nick
The type of training slash education slash marketing that you're doing to kind of walk them through the process of one you like, you must have these hard conversations with your customers and here, wWhat do you do to kind of help them bridge the gap to folks that just don't even want to listen to it? Sure.

Rick T
I mean, it's a great question. I think, you know, I kind of look at this as sort of an innovation opportunity or a three legged stool. Okay. on, you know, the first is consumer awareness, you know, to the potential policyholder, how do you get to the 300 plus million Americans to you know, let them know that there is coverage available and everyone technically lives in a flood zone, right? But most Americans think that they'll never experience flood because of where they live, right? There's been some statistics that say, you know, if you have a 30 year mortgage, on you're three times more likely to have a flood event, then a fire event, right, but most people have home insurance but not flood insurance. So that's an awareness on at the consumer level, you know, to say the policies are relatively economic, you know, based on where you live, they do supply, ample coverage, and there's a lot of education around that your homeowners insurance doesn't necessarily protect you from water coming over a foundation, or surge and all those things that you could possibly get not just in the coastal areas. The second stool, leg of the stool is really the focus towards the agents. And Nick, you probably know this that you know, of the 70,000 agents that we touch, there's a very small, very small number of the agents that actually are, you know, selling flood insurance and educated on flood insurance like the 80/20 rule, 20% of the agents sell 80% of the policies. So really, that's an awareness standpoint to help an agent, how would I approach a consumer? How would I approach a policyholder? How could I cross sell my book of business where I have clients that I could potentially reach, you know, for flood products, and then all that wrapped around on the third leg is technology platform innovation, you know, as an insurance agent, as someone who sells insurance and maybe potentially flood insurance. Selling flood is very complex, right? There's a lot to it. We're building, you know, an end to end holistic platform that's cloud based, that's intuitive, that essentially guides an agent through the process. You know, in and leveraging this is a very underserved part of insurance is the flood insurance space as it relates to technology innovation. So we're really stepping up and you know, putting our hat in that ring and saying, Hey, we we need a platform that facilitates or takes the complexity out of buying a flood policy.

Nick
Yeah. Can you talk about that a little bit like, you know, what would what does an interaction with NFS look like from an agent's perspective? Probably a lot of agents listening to this. What does that look like? How simple, streamlined, easy is it when they get on?

Rick T
Yeah, I mean, it's a dynamic change to what traditionally, an agent experience might have been with our new platforms called Trident on we have approximately seven customers on the platform with about 6000 agents out I'm logged in, we're going through a, onboarding process with our clients this this calendar year. And really it's an intuitive type of application, it's a dynamic application process, meaning that, you know, based on the street address that you put in, based on the profile the house, there are, the application processes is maybe five or six pieces of information to get you to maybe generate what we call a PRP policy, which is your basic standard policy based on your house type and then and then, you know, with that, it guides the agent through with pop up videos, newer chat opportunities, you know, so really, we're finding when agents are getting on the platform, there's not a lot of like, educational material that we need to do even though we onboard with education material. Because the platform is so intuitive, they can maneuver themselves through the process. It allows them to upload information like you know, elevation certificates, and some of the other things that are required in issuing a flood policy. And it's an end to end solution. It's, you know, we built it from an agent experience. But we also built it from a policyholder experience, we're looking at trying to reduce the days from first notice of loss to payment, you know, from, you know, your traditional maybe 30 days from a policyholder, notifying about loss to check in the mail. You know, we think we can potentially take that in half with the new claims platform. And, really, it's all about servicing the policyholder which is important to the agent, of course, right? Because it's his or her reputation, but it's also having an end to end intuitive program, where you as an agent could go and manage your flood book with an agent dashboard with alerts and these are things that you still need to do to follow through or renewal. So really, it's it's a really cool, neat platform that we believe is going to change the flood business.

Nick
Yeah, it's interesting because as you're, as you're describing that I had a conversation with Bryan Falchuk, who's writing a book called The Future of Insurance talking about trying to understand your customer and NFS through the Trident you actually have two customers, right? Like as you just described, you have to take care of the broker/agent and you have to take care of the actual policyholder, and there's an expectation for you to meet both of those. I don't think a lot of people understand like how challenging that is because a broker is more of the transact mentality. They kind of know what they want. But you're also you also need to educate them a little bit so that they can get to the policyholder and the policyholders looking to be taken care of.

Rick T
Right.

Nick
You know, so there's there's a really hard balancing act when it comes to that I don't think people understand the complexities or the challenges when it comes to checking off both those boxes.

Rick T
Yeah. And I look at it to is, you know, sort of our obligation to the agent, you know the agent is making his or her living by building these meaningful relationships in these property and casualty lines. So they're building up a base of business, and it's an annuity based business. And it's a generational business, right. It's something you know, with my, you know, my agent and, you know, I've, I have a long term history and, you know, one bad experience doesn't just affect the flood policy, it affects their whole book, potentially. So we take that very seriously. So the more we can do to get the customer, the policyholder, engaged in the in, you know, inside of you know, to participate In the process, and give them a good experience and make it easy and simplified, we're supporting that agents reputation, but also taking care of the customer. At the same time, that's really our obligation is to, and we take it seriously because we know we support the, you know, the, you know, you support FEMA in the NFIP product and, you know, there's, there's there is there is a higher calling here when, when there is a flood, there, it's usually you know, it's there's a lot of anguish and pain in things that are going on where you might be separated from your house and there's just a lot going on at that time too. So it's important that we have an approach that is very customer focused,

Nick
Yeah, I view it wreck as an opportunity to think of it you know, we comes down to dollars and cents but like, I like that generational aspect that you talked about it's I own, I almost feel like I have an obligation to help the agent become an even bigger trusted advisor.

Rick T
Right

Nick
And try to walk them through listen, the, you know, the risk for this property owner is higher, they're not in the flood zone, but it's higher than what they think it is. And if they do have a flood, it is almost a guarantee you're gonna lose them as a customer, right? If they don't have coverage, right? Because if they do have coverage, you're going to be a hero to them. So I almost I enjoy having that conversation in a way to tell the agent, listen, this is a this is a different way or unique way for you to differentiate yourself, where everyone's trying to get your homeowners or the auto or coming around and get the BOP. If you can get them to buy the flood that you'll still have access to all those things. But you're going to differentiate yourself and you're going to come out smelling pretty good when that event does eventually occur.

Rick T
Sure, yeah, no, that's absolutely right. I think that there's, there's value there to be that trusted advisor, you know, and let them know that, you know, this, this additional product that they can procure, or, have, you know, in addition to the homeowners can can mitigate any of that potential risk where something happens and nope my policy doesn't cover it. Right. That's, that's, yeah, that's not a good situation for an agent to have.

Nick
I believe that when Hurricane Harvey hit the Houston area, that 80%...first of all, when when you hear Houston you're automatically start thinking like storm surge. That wasn't really Harvey. Harvey was a massive hurricane that got stuck. And just like a 50 inches of water, the water had no place to go. It was an inland flood event, as the tributaries and other low lying areas kind of filled up, I believe 80% of the properties that were damaged. Were in a X- zone.

Rick T
Yes.

Nick
So they weren't actually technically in a flood zone yet. This was catastrophic flooding. I'm curious how often do you bring that to that point up?

Rick T
what we do I mean, we we, we we bring up Harvey a lot as an example of the fact that to your point, you know that the people in the homes that were affected are not where you think these homes would have been, depend you know, if you had your you know, thinking about Houston potentially

Nick
Miles and miles away from the coast, right.

Rick T
So what happened? Yeah, with that storm, is that what you said? What just what you said he got stuck, it just it just, it didn't move? It hovered. It was massive. There was a tremendous amount of rain that happened over you know, a long period of time and most of the homes that were affected were inland. So we talked about, you know, the zone is where people feel they're safe. Right? It's one of the most inexpensive policies to to procure or to issue and, and it's, it's something that I think that there's this whole mentality out here and I think we've referenced the Harris Poll a couple times where, you know, 62% of homeowners say that they're prepared for a flood, right, but only 12% have flood insurance. So to me, the, what does that tell me? What message am I getting from that I'm getting the message, I think through the homeowner is that I don't think I'm in risk. I'm not at risk of flooding. So, you know, that's where the, you know, that's where the Harvey conversation comes up. That's where some of the spring flood conversation comes up. You know, we had some, you know, some Michigan dams, you know, that broke recently, we've had, you know, major rivers overflowing, you know, with with certain things that have happened in the Midwest. And, you know, we've seen a lot of activity in terms of flooding, you know, in areas where you typically wouldn't see flooding, too. So, you know, those conversations come up mostly with the agents, especially as we're looking at agents that maybe are less coastal based and more Midwest based. And we're trying to, we're trying to, to educate and activate that group of agents that could potentially be the agents that might be the next generation of selling, you know, flood products, you know, to their customers.

Nick
Yeah. I think of the earthen levees, Sacramento, Missouri River all you know, all throughout the Midwest. I mean, there are thousands of miles, of them all over the place. And you know, if those levees weren't there that those would be flood zones? Right. The levees is the only thing that's protecting them. And it's still tough having conversations about that because there's a false sense of security that comes up but that one seems easy Rick like that one seems like a very easy conversation because they're earthen levees. If they weren't there, everybody would agree that this would be a flood zone. These properties probably wouldn't deserve to be here and their earthen and right, there's a lifespan. And now we have the Michigan dam, which is the same earthen type of structure that threatens all that. It's like, I almost feel like our Rick we're going to have like a constant marketing battle. Like just Sisyphus, trying to push the boulder up the hill, up the mountain to have this conversation. But every new event is like another data point where it's just like, watch this video. Watch. I'm a Elliott city Maryl;and had two one in 1000 year floods within a five year stretch. And that's up on a hill.

Rick T
Right?

Nick
You know, it's like watch this video, it doesn't matter if you're up on the hill, behind the levee, in an area that's an X zone, or in a desert, like when it does rain, the water has no place to go. It's gotta go somewhere.

Rick T
Right. I think I think I can go please. I think you can, you know, some of the some of the, you know, obviously social media has, sent a message out, you know, maybe to a broader, you know, group of potential, whether it's consumer based direct to consumer information, I think, you know, we're looking at, you know, potentially a higher than normal storm season this year, right. So we, you know, I think they're predicting maybe eight hurricane potential from a severity standpoint, maybe 16, tropical storms and in and there's, some evidence, as you're pointing out, there's some evidence, you know, environmentally that, you know, these things are becoming more frequent and more severe. And I think that, obviously, we're not trying to use, you know, scare tactics or anything like that, but we're, you know, using some of that information that's being pushed out from a news coverage standpoint through social media, some awareness of the fact that that'd be a more active season. And then trying to associate that with certain things that have happened throughout the country, as you're pointing out, that are know that you're, you're becoming a little bit more frequent that are more or less traditional, you know, previously So, you know, those things can potentially help with awareness. And and, and maybe start a conversation with the consumer, the policyholder and the agent. We're trying to get the agent, the consumer to talk about this.

Nick
All right. You mentioned that The NFS program is part of FEMA NFIP. That's that program has been changing over time. And there, are there any benefits because I don't I don't actually know the program like, super well, I know, the rudimentary details, but are there any benefits to someone buying coverage now? Because the program is going to change usually, you know, a lot of these more governmental programs grandfather and do things that are just like, you know, they prove, it's like better to get it sooner rather than later. So can you talk about that a little bit?

Rick T
Yeah, sure. Um, well, I'll just quickly go, you know, so we've been NFS has been around for 35 plus years. So we currently manage about $1.8 billion of gross written premiums and about 1.4 million policies. And in the

Nick
that's about 20% of the entire NFIP program.

Rick T
Yeah, might be a little bigger, actually. I mean, and I got that backwards, I'm sorry, $1.4 billion in gross written premium 1.8 million policies. Yes, I gotta reverse because it's a little less than $1,000 per policy when you look, on average in terms of your policy costs. So, yeah, I mean, it's, it's, you know, we're, you know, we're a pretty substantial player, maybe a third of the marketplace of policies that we're managing? And the so to your, to your point on, there's been changes, right. There's been changes in legislation. There's, there's changes in the arrangement with the carriers and with FEMA, but I think one of the more interesting pieces and some of the reason that someone should start thinking about it is that in my opinion, is that because the government underwrites the product. The product is somewhat monolithic, meaning that from a pricing standpoint, it's not priced like a traditional insurance policy would be based on maybe where you located, you know, what city you're in, you know how old you are, and you know, all those types of things that are more actuarial service type situations. But the government's pretty close to putting in a program called risk rating 2.0, which is going to be the first step of actually, setting the pricing for, an insurance product based on where you live and your location, your street address, and in it and the risk, you know, and using that data historical data to be able to set policy cost. So, I mean, there's, there's some, in my opinion, there's some opportunity now where, you know, you get into the program There's a lot of grandfathering that goes on as it relates to the way they change your flood zone determination, where you're located, that there's a changing mapping system that goes on frequently on as it relates to where you're located. It continues to get better and better, you know, using technology. But they're the programs changing and the programs improving.

Nick
Does, NFS do anything around elevation certificates and flood zone determination?

Rick T
Yeah, we do support floods on determination for our agents in our carriers. So we we provide that service for our clients through the different types of product opportunities you have for flood zone determination, there's guaranteed determination, there's non guaranteed determination.

Nick
What's the difference? I didn't know those existed, what's the difference between the two?

Rick T
Well, the difference mainly is guaranteed. Meaning that you're you're going to get on a document back that says that you are precisely in this area from the street address standpoint, and you're precisely in this in this flood zone, right? And then therefore, I can now price your policy where there are other less expensive opportunities that people use or clients use or agent use that are sort of not guaranteed that they might be just sending out something to their clients to say, Hey, if you're thinking of a flood policy, and you're thinking of maybe procuring something or talking about it, you know, based on where you are, you know, this is the range of what we think the cost of your policy could be something similar that you might get from an insurance agent from other things like relates to coverage?

Nick
Yeah, I was I wasn't aware of that. I just know. It's significant set of hurdles. I know, you know, I've worked with agents and brokers who have property owners that have been able to get their flood zone changed by having someone come out, will Risk Rating 2.0 change that part of it? It's sounds like it would, but I'm not I'm not exactly sure.

Unknown Speaker
Yeah, I don't think that risk rating 2.0 will essentially change the determination of your flood zone. It will potentially change the cost of the policy, you know, based on it in conjunction with new mapping that is constantly being updated in terms of where you're located in what is considered a X zone compared to a different type of flood zone. So those those things in conjunction will determine your flood policy. And the cost of the policy.

Nick
For those property owners that have been grandfathered, will be will there be any changes to their status?

Rick T
That's hard to say? Because that that's the federal government. So...

Nick
political question...

Rick T
Yeah, we don't determine that we follow on, you know, there's there's been on the, you know, because of the COVID situation, what has happened with through the federal government and through FEMA. There's been a grace period for flood policies. So the federal government granted it 120 days for you, as a policyholder to pay your policy within that one hundred and 20 day period, even though it might have expired. So there's a we're working inside of a grace period, right now, we're because of the COVID situation because of, you know, some of the economics that we've witnessed, you know, the downturn in some of our financial markets in our, in our economic markets. We've got the government has given, you know, this grace period in terms of paying and renewing for your policy.

Nick
So we are coming up to hurricane season, we are in hurricane season, they get confused what day of the week it is and what day of the month, or what month it is. So we are in hurricane season. And I mean, just I think you've kind of brought this up before, how important is it just to have that conversation now? I'm assuming your product has a waiting period. Yeah. Like the conversation needs to happen now because we're going to be getting into the heat of the summer, the heat of the hurricane season, and you don't want to get into a situation where a category five hurricane is bearing down, you can go run and get a policy, but it's not going to kick in, like, how important is it to have that conversation like today?

Rick T
Yeah, I think it's really important because there's a 30 day waiting period for a policy to be issued. And it's, designed that way right to say that, you know, with no, it is designed to have a product that has a period of time, so the product just couldn't be procured, you know, the day before a potential hurricane in terms of where you're, where you're located. So there's a 30 day waiting period, we're getting into the heat of, you know, the season. We're, you know, we anticipate higher than normal activities, as it relates to, you know, tropical storms and hurricanes. So, you know, it's, in my opinion that this is one of the busier busier periods for new business to on top of it Nick so when you look at our business cycle, you know, on a cyclical basis as we move into May, June, July, August, September, we are new business numbers go up, you know, pretty, you know, not...they don't double or they're not but but there's a spike, right because because of the awareness and in some of the work that the agents do out with with their clients we have. So I think that this particular moment in time it's a really important time to have that conversation, at least from a policyholder standpoint or potential homeowner. They can make a decision. If you know the policy cost and the coverage and what they can leverage by having that flood policy makes sense for them.

Nick
Yeah. Any projections. I'll give you mine If you want to share yours. I want to like entice brokers to get excited about this, and I'm you know, I'm kind of telling them from my expectations on what I'm seeing. And I think the marketing starting to take hold Rick, my expectations are this market is going to double or triple. In the next five years look, we're gonna get a lot of folks that prior would never have considered flood, to buy it. And I'm telling brokers to jump in because like now's a really good chance to get some access to premiums. So have those conversations now? Do you or does NFS sort of project out like where they think the flood market is going to be in the next five or 10 years?

Rick T
Well, I think personally, you know, the reason the reason I came in came here, you know, in January, on one of the reasons I shouldn't say there are a lot of reasons I came here, but...

Nick
Cause you're doing God's work, Rick, come on.

Rick T
Yeah, I was, you know, I was with the same company for 30 years. So it wasn't, you know, I wasn't really looking to move but um, After doing the research, you know, in terms of in terms of the coverage, and if you look at the coverage in this country, you know, it might start in Texas and wrap its way around to New Jersey, right coastal. So if you built a heat map of where the policies are, policies live in a particularly small area of the country. I'm a proponent of doubling, I believe that the the coverage could easily double in the next three years. And I think the reason that I'm we're making all the technology investments we are making flood simple, you know, we our slogan is Flood Ought to be Simple, and making all the technology investments and making the educational investments. You know, we believe that we can potentially double coverage in three years now. I think there's a lot of opportunity to Nick with private product. You know, you have your traditional NFIP product, you have a lot of different private product, offering I think in combination, if the market has selection, and the selection makes sense, and it's easy to procure and easy to understand as a homeowner, then the potential to triple coverage is there too. So we're, we're in that we're in that boat we have we feel the responsibility, we're making the investments because we think the market is poised to grow.

Nick
I don't know, does Trident have the capability of going direct to consumer does NFS do any of that?

Rick T
Currently, we don't on the, but we definitely the we definitely believe that the future is a direct to consumer model, and a direct to agent meaning a multiple channel approach. So we do some direct to consumer work, so I don't want to say no, for some of our clients we've built out direct to consumer sites. where their clients could have a branded experience with their carrier. But you know, essentially were the backbone, you know, to the procurement process and the policy administration and the claim work. But yeah, Trident will is built and designed to have a direct to consumer on focus and portal.

Nick
Awesome. Rick Tighe, thank you so much for coming on talking about my topic, close to my heart. I will have all of your contact information on the show notes. So anyone that's listening, you don't have to pull over and, or whatever. Just go to the show notes. The transcript will be there. And, Rick, I appreciate it. Thank you so much.

Rick T
Thanks, Nick. Thanks for having me. It's been great.

Nick
For everyone that's listening. We're not over this yet. keep hearing about a second wave. Keep safe. Wash your hands. Practice your social distancing. Let's all be good to one another. And once again, Rick, thank you.

Rick T
Thank you

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