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).
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