Climate risks are expected to add as much as $183bn to annual premiums for property insurance by 2040, as the growing frequency and severity of extreme weather prompts insurers to raise prices. Swiss Re Institute, the reinsurance group’s research unit, predicted on Monday that climate-related risks would account for just over a fifth of the overall rise in property premiums over the next two decades.

It is not just the dramatic property damage seen in raging Australian and Californian firestorms to  freezing Texan property blanketed in ice. 

Swiss Re said that in some important markets including China, the UK, and France, weather-related property catastrophe losses could double by 2040 because of climate risks.

Jerome Haegeli, Swiss Re’s group chief economist, believes the changing climate is the “number one” risk to the global economy. The insurance industry has the capacity and expertise to cope with the risks, he said, but highlighted that the forecasts for losses and claims assumed that the world met the target of keeping the rise in global temperatures to 1.5C above pre-industrial levels.  

When considering which technology partners can help cope with this doubling of losses insurers must plan macro and micro strategies in parallel. It's no good choosing one point solution to tackle one problem if it cannot build into an overall world-class technology that competes with new full-stack insurtechs like Lemonade that are unencumbered with legacy core systems.

Whatever choices are made data is and always will be at the heart of insurance.

Data is key to to all aspects of insurance from underwriting to settling claims. Many insurtechs tackle bite-sized parts of the insurance picture e.g. Quote & BInd plus Mid-Term Adjustments and Renewals. Others Claims from FNOL to Settlement.

Others aim to provide a complete data-driven ecosystem platform  to support all aspects of insurance from Underwriting, providing capacity and distribution to settling claims. CoreLogic and Verisk are shining examples. One core advantage they offer is a viable data infrastructure and model that powers all aspects of property insurance. 

This is key not only to innovation, customer satisfaction, effectiveness and efficiency. Carriers must not forget compliance and regulation or they have a "Lemonade Moment".

"Recently, Lemonade hit a speed bump in its journey as a visible disruptor and innovator in the insurance industry when a privacy class-action lawsuit over its alleged collection and use of biometric data was filed on August 20. I am not privy to any details or knowledge about the case or what Lemonade is or isn’t doing, but the Twitter event and public dialogue that built up to this moment brings forward some reflections and opportunities every carrier should pause to consider."

Anthony Habayeb co-founder and CEO of Monitaur, an AI governance software company.

(Further reading Make lemonade out of Lemonade: Takeaways from recent events )

So whilst there is great pressure to adopt self-service eFNOL and straight-through-processing (STP) for simple property claims this must not be at the risk of automation hiding decisioning from homo sapiens in carriers. This has been emphasised in a new study concluding that experts are too quick to rely on AI explanations and decisions.   Maybe the reason Lemonade faces a privacy class action.  

"As AI systems increasingly inform decision-making in health care, finance, law, and criminal justice, they need to provide justifications for their behavior that humans can understand. The field of “explainable AI” has gained momentum as regulators turn a critical eye toward black-box AI systems — and their creators. But how a person’s background can shape perceptions of AI explanations is a question that remains underexplored.

A new study coauthored by researchers at Cornell University, IBM, and the Georgia Institute of Technology aims to shed light on the intersection of interpretability and explainable AI. Focusing on two groups — one with an AI background and one without — they found that both tended to over-trust AI systems and misinterpret explanations for how AI systems arrived at their decisions."

See the detail in Even experts are too quick to rely on AI explanations, study finds

When choosing technology partners make sure that they are on the front foot to address these issues. Too many times pilots and trials are started driven by how the software or platform looks rather than the ability to deliver cutting edge innovation in combination with complying with privacy laws and other regulation. 

It is not just a matter of class-action lawsuits. 

In the UK the Financial Conduct Authority (FCA) has already bared its regulatory teeth over business interruption insurance and warns many insurance firms yet to meet tougher governance rules. It has proposals to toughen these considerable and it will be no use hiding behind algorithms, machine learning and AI. 

Last month, the US Treasury’s Federal Insurance Office published a request for information on climate-related risks to the sector.

The Property and Home & Contents Ecosystems Players like CoreLogic understand this as do digital claims platform vendors like Synergy and RightIndem. Their business models are built on data integrity, secure integration and being part of viable ecosystems. No one vendor has everything a carrier needs so it is essential that they offer low-code/no-code customisation plus the ability to integrate any insurtech or other technology essential to deliver a complete answer for customers. 

The insurance industry is not an open-standards one and just because a platform offers APIs does not mean it can integrate with any other app. Most point solutions are customised to specific carrier requirements meaning that some scripting, testing and development is required. It is wise to test their resources and capacity to integrate using references. 

CoreLogic, Synergy and RightIndem are good benchmarks against which to compare current and future technology partners. 

These may include (but not be restricted to) 

•    Major core platforms Guidewire, Duck Creek, Majesco, ICE, Pega, Innovation Group and so on. Good on breadth of functionality but sometimes lacking in specifics e.g. claim management. And traditionally involving Capex and high annual licensing costs though that is changing.

•    Quote & Buy, MTA & Renewal Platforms like Go-Insur, HUGHUB, iptiQ that enable an insurer to allow a customer to interactively manage all their policies from one dashboard 

    Digital Claims Platforms Synergy Cloud, RightIndem, Snapsheet, ClaimsGenius, Salesforce Industries, Five Sigma, 360Globalnet, Claims Technology etc

•   Ecosystems  CoreLogic, Verisk, 

•    Point Solutions Weathernet, Tractable, Audatex/Solera, Shift, Friss, Solera and many others

•    Combined claims services and technology providers Crawford & Company, Sedgwick, Davies Group, Claims Consortium Group. Control€xpert etc.

•    No-Code/Low-Code app building platforms from Unqork, Netcall…

•    Embedded insurance Wrisk, Qover, etc

Further Reading

Regulation – the next innovation super-charger for climate change risk assessment?

Why are insurers' property & contents claims management processes stuck in the analogue mud rather than digital uplands? 

Data extraction, ingestion and sharing models for insurers