Insurers using tech to boost customer resilience as climate risks grow

Insurers are using technology, such as aerial surveys and flood warning, to help home and business owners in the face of increasingly frequent wildfires and flooding and a growing “protection gap”.

Petra Hielkema, chair of the European Insurance and Occupation Pensions Authority (EIOPA), said earlier this month that climate risks are real and present and there is a growing pressure to do more to address them. 

Delivering a keynote at Insurtech Europe in London last week, Paolo Mantero, group chief strategy officer at Zurich Insurance, described the technology his company is using to boost customer resilience and reduce claims.

He explained that Zurich uses aerial images of homeownersʼ properties when writing policies. Where trees overhang buildings, coverage could be granted in return for cutting back the overhanging branches, for example. Such measures had proved their worth in the recent California wildfires, he added.

Mantero said the protection gap — the difference between the total financial loss of a natural catastrophe and the amount of that loss that was insured — had risen by 65% in the past five years and now stood at $8 billion.

He said it was increasing because “we live in a risky world, because underlying risk factors are growing and mainly driven by climate change”. There was now a clear correlation between warmer temperature and increased frequency of cyclones, floods, storms and wildfires (see chart), while population growth in states prone to natural disasters, such as Florida, was also having an effect on the widening protection gap, he added.

Underinsurance has social consequences, as businesses with out adequate insurance to rebound either closed, cut jobs, or otherwise divert ed resources from growing, Mantero said.

Build back better

While ‘building back betterʼ appeared expensive in the short term, it delivered resilience benefits in the long run, Mantero said. “If you apply the best-in-class standards in construction to increase the resilience of the buildings to wildfires, that investment costs around three to 12% additional to the building cost, but it pays six times the money . And if you look at other perils, like hurricanes or earthquakes, the payout is even bigger.”

It would need government and private sector collaboration to improve outcomes from natural catastrophes, he added. Building codes, better urban planning and early warning systems would all contribute, while insurers’ models could help communities with prioritising interventions.

Flood resilience

Mantero also highlighted the work of tech firm, Pro Physical, in reducing losses from floods. “Pro Physical gathers data from sensors, water level, and drainage, which, coupled with topographical information and a built-in hydrodynamic model, can provide early notice of an incoming flood to almost half a million houses in the UK.”