3.7 LESSONS FROM THE FIRST PRIVATE FLOOD INSURER INDUSTRY PL...

8.3.7  Lessons  from  the  First  Private  Flood  Insurer  

Industry players cite Neerlandse, an emergent private insurance company offering flood cover, as an

example why it is not commercially economic to sell private flood insurance in a free market. Frequently

people have referred to their product as quite expensive and also limited. Neerlandse, however, set

premiums that are based on their own flood risk model and therefore are differentiated. Their insurance

products are underwritten and based on a commercially sound business model (EP, 2013). Granted it

only covers domestic property up to seventy-five thousand euros, but leaving that to one side, the

demand for their product since the launch in December is rumoured to be quite slow (EP, 2013).

Perhaps, given the generally low perception of flood risk in the Netherlands, consumers do find it too

expensive. An outstanding question remains though. Given Neerlandse are the only company offering a

mainstream consumer flood insurance product, i.e. there are no direct comparator products on the

market, the relative value of their product is not easy to ascertain (EP. 2013). It cannot be directly

compared with flood insurance in other countries, for example France or the UK, as the flood risk profile

for the Netherlands is completely different. Making such comparisons between countries that face such

different risks and that operate different flood compensation arrangements does not make much sense.

The prices that Neerlandse charge are presumably as close to the lowest they could arrange with Kiln,

their Lloyd's underwriters, plus the operational fees and costs of selling and marketing such a product.

A free market is likely to lead to lower prices compared to a cartel-like operation that the Dutch

Association of Insurers has attempted to create. If more companies began selling private flood

insurance, it is probable that prices would go down due to competition and as the Dutch flood context is

better understood by underwriters (EP. 2013).