Study shows agent, commercial client differing views on severe weather readiness
The increasing frequency and severity of weather events across the globe have many commercial insurance customers worried about damage to their businesses and properties – and rightfully so, with data showing 40% of businesses fail to reopen following a disaster1.
But alarmingly, Nationwide’s latest Agency Forward study finds that insurance agents believe many of their commercial clients don’t hold adequate coverage to protect their businesses from growing climate risks.
“Weather risks continue to evolve, and as such, adaptation and resilience must become integral parts of a business’s planning and decision-making processes,” said Mark Berven, president and COO of Nationwide’s Property & Casualty organization. “It’s incumbent upon us in the insurance industry to ensure our clients are fully informed about weather-related business risks and how they can best protect against them.”
Nationwide’s survey polled “commercial property stakeholders” – defined as commercial property owners, new construction builders and business owners – to gauge their concern and preparation levels around severe weather events that have or could impact their operations.
Concern about severe weather, natural disasters is high among commercial property stakeholders and agents
The survey found that worries about severe weather are high as 62% of stakeholders are either very or extremely concerned. In addition, more than one-third (36%) have experienced damage from a natural disaster in the past five years, primarily driven by hurricanes, floods and tornadoes. In hurricane-prone states, roughly 6 in 10 (59%) have experienced property damage in the same time period.
This concern is warranted given how long it can take to recover and how much it can cost during the process. About 4 in 10 of those who experienced damage from a natural disaster said their recovery took one to three months and roughly half (49%) said it took four to six months. For 83%, the cost of their recovery was $10,000 or more, with 49% reporting costs between $20,000 and $50,000.
Property stakeholders feel prepared for severe weather, but agents aren’t so sure
More than two-thirds (67%) of property stakeholders report being prepared for severe weather events. Nearly all say they have a plan to prevent property damage and believe their management and workers would know what to do in the event of a weather emergency.
Almost all property stakeholders report working with an agent to ensure appropriate coverage for severe weather events. However, the majority of agents (52%) believe that less than half of their clients have an appropriate level of coverage for the climate risks they face.
“While it’s encouraging to see many property stakeholders feel prepared for severe weather events, our research indicates there’s a discrepancy between their perceived readiness and the reality of their coverage,” said Berven. “Gaps in coverage can lead to significant out-of-pocket costs if a loss does occur, underscoring the need for agents to review clients’ policies thoroughly and verify they’re properly insured to value.”
Act now: Prioritize weather preparation conversations and risk mitigation resources with clients
Commercial property stakeholders say they’ve engaged their agent for help with preventing wind (76%), roof (69%) and water (61%) damage to their properties. Eight in 10 agents also report helping clients with these topics regularly.
Yet, there’s opportunity for agents to do more to help clients understand their climate vulnerabilities. Fewer than half of agents (42%) say they are promoting property-protection resources to their clients even though their clients want these tools. Offering this information proactively reinforces their expertise and value to customers as climate risks remain top of mind.
“Business owners have a long list of priorities as they keep their operations going, so it’s important for their agent to be prepared to talk to them about the weather risks that could impact their locations throughout the year and share valuable resources on how to mitigate those risks to protect their properties, employees and customers,” added Berven.
1 Federal Emergency Management Agency (FEMA)
Edelman Data and Intelligence (DXI) conducted a national online survey of 500 commercial property stakeholders and 400 independent insurance agents on behalf of Nationwide from August 29 – September 19, 2023. As a member in good standing with The Insights Association as well as ESOMAR Edelman Data and Intelligence conducts all research in accordance with local, national and international laws as well as in line with all Market Research Standards and Guidelines.