5 Ways Insurance Should Adapt to Severe Weather Trends

2020 was an expensive year in natural disasters, contributing to a hard property insurance market. Unfortunately, expensive natural disasters are “trending” and expected to continue this year. 

Less than normal winter rain and snowfall in regions of California lead experts to believe the state is in for a “worse than average” wildfire season, even one that might be similar to the tragic 2020 season. The Tropical Storm Risk (TSR) has also issued a 2021 forecast predicting “above normal” hurricane activity. The organization forecasted 16 named storms for the Atlantic Ocean, seven of them hurricanes and three of those major hurricanes. Climate change experts suggest global warming is contributing to an increased number in named storms and the creation of more “superstorms.” 

Bracing for an expensive year, there are a few things insurance industry leaders can do to prepare and better price policies to accommodate for impending natural disasters. 

1. Help Clients and Policy Holders Mitigate Risk

Based on the risks associated with the location of the policy, insurers can recommend clients take measures to lessen the loss exposure due to severe weather. For example, insurers can initiate programs where they call on experts to evaluate homes in areas prone to flooding or wildfires and then make recommendations. Or, insurers can provide clients approaching a new build or renovation with construction recommendations that help prevent damage during natural disasters. 

2. Engage Climate Experts in Policy Writing

In order to understand the risks associated with specific areas and climates, insurers can work with climate experts who have a greater understanding of the weather patterns in those areas and what risks they might encounter. This will help agents price policies accordingly. FEMA recently released its report on the riskiest and safest counties for natural disasters in the U.S., rating the risk in every county in the country. Reports like this are extremely useful in better calculating premiums. 

3. Support Stricter Building Codes

Home builders sometimes fight a state adopting stricter building codes. However, when a state is considering a change to codes, insurance companies can make a good case for minor changes that will significantly contribute to reducing building damage for little to no change in construction costs. When a state sees the difference that a minor change would have made in the cost of a natural disaster, it’s a harder argument to lose. 

4. Partner with Construction and Architecture Companies

New technology has paved the way for improvements in construction and building design. Just because a state’s building codes may not require a company to use them doesn’t mean you can’t encourage or convince a company to choose to make these improvements themselves. There are even minor improvements they could include that would barely raise construction costs. You could also recommend certain builders as having your company’s “seal of approval” because of their commitment to higher standards in construction. 

When it comes to your clients and policy holders, make them aware of what construction improvements they can ask for when building or renovating a home or office space. If these improvements would result in reducing their premiums, that’s also an important fact to share.

5. Encourage Green Building

Since scientists are attributing the increase in natural disasters to climate change, insurers can attack the problem at its source by encouraging green initiatives in building. Again, insurers can partner with construction and architecture companies to offer these building adaptations and inclusions. They may offer home and business owners premium discounts for buildings that have environmentally-friendly features. In the event of a natural disaster, insurers can also offer an additional percentage in replacement costs to those who rebuild with green materials or add green home features.  

We have a long way to go in order to get climate change under control. However, with a commitment to these simple steps, we can keep policyholders safer and reduce the claims cost of future natural disasters. Our Personal Lines department will find your clients the best coverages for their needs, taking their geographic location and home characteristics into account.

Don’t See What You’re Looking For?

Chances are ... we cover that, too. Jencap’s friendly experts are here to answer any questions you may have.

Q

How Can We Help?