When most of us tend to think of technology with regard to the insurance industry, we tend to think of it in terms of the latest vehicle monitoring devices or perhaps self-driving cars. However, while it might not receive the same high-level of attention, the use of technology in helping to create new flood models is expected to make major changes in the flood insurance market.

Although the NFIP is still the largest issuer of flood insurance in the country, experts say that 85 percent of homeowners are still not covered by flood insurance. This represents a major opportunity for private insurance companies to step in.

For over forty years, FEMA has been responsible for developing flood risk maps across the entire country. The maps cover approximately 98% of the US population and are used for several purposes including flood risk assessment. The maps are also used to determine flood insurance rates. Although FEMA has put a lot of time and effort into developing these maps, they do not cover issues such as the frequency of flooding outside of the designated flood zones, risk accumulation metrics, or how much loss the NFIP has experienced.

Private insurers have shied away from these maps due to their lack of information and accuracy. Issues such as the highly localized nature of flooding and the fact that flood damage can vary from one home to another based on topography, the type of soil, land use, and the type flood prevention methods in use. The mapping resources available to FEMA have made it virtually impossible for any type of accuracy.

On the whole, we have understood the key concepts of flooding, it has only been in the last few years that we have had access to computing power and high-resolution data. This has made it possible for us to create more realistic flood models. We already know that providing the water is flowing downriver, it is relatively easy to model. But what about when the water crests and flows over or breaks down levees?

Thanks to the latest advances in technology, it is now possible to accurately simulate what happens when rivers overflow and the water no longer flows in one direction. This process has allowed us to create more accurate flood models and maps. The ability to map changes in topography far more accurately. We now have access to vital information including land use and more that make it much easier to determine flood risks.

Modern computing power makes it possible to physically model how flood waters will behave at resolutions that only just a few years ago were impossible. These major advancements also make it possible to determine flood areas more accurately. For example, instead of rating only 100- and 500-year flood zones, it is now possible to delineate say, 40-year flood zones. Thus those homes within the 40-year flood zone would have a higher risk than the rest of the homes in the 100-year flood zone.

But more than this, the new modeling technology also makes it possible to more accurately determine earthquake and hurricane risks. Thus, the new technology makes it possible for insurance companies to determine potential annual losses, create frequency curves that cover risks, and make it possible for insurers to maintain control of their flood risks.

In essence, the new models make it possible for insurers to understand flood risks and underwrite them with new confidence. Although these models may be relatively new, many private insurers believe they will make it possible for them to provide their customers with better services and provide coverage for their customers at prices that are lower than those offered by the NFIP.