Satellite image of Tropical Storm Cindy, courtesy of hattyphoto
With an above-average 11 to 17 named storms predicted this hurricane season, members of the P&C insurance industry need to be fully equipped to weather the storms. We know it only takes one bad storm to impact a nation’s economy for months, even years. Hurricane Matthew (2016) was the first hurricane to reach Category 5 since 2007, causing $10 billion worth of damage in the U.S. and displacing thousands. Not only that, it was the 13th billion-dollar weather disaster in the U.S. last year.
Heading into the 2017 season, there’s still time to act, but insurers need to arm themselves with the knowledge to do so. Here’s the latest on how to use data and analytics to proactively inform your hurricane risk and response, and protect your insureds.
The all-encompassing peril
Hurricanes have associated risks that often outweigh the storm itself. Like a trail of dominoes, a hurricane can set off a chain reaction that seamlessly combines two of the most catastrophic risks: wind and flooding. Damage from high-speed wind is typically top of mind during a hurricane, as wind is covered by most homeowners and commercial policies. But when it comes to flood risk, while most insurers focus on the impact from coastal flooding, when a hurricane truly wreaks havoc, it’s due to the inland flooding that nobody expected. We can look at the NFIP as a cautionary tale in that regard, as they’ve slipped $24.1 billion into debt after significantly underestimating Hurricane Katrina and Hurricane Sandy flood risk.
Individually, hazards such as inland flooding and high-speed winds pose threats to human life and property. When combined, they cause widespread destruction and drastically increase the economic burden felt by insurance carriers. Elements of inland flooding are at peak intensity during a hurricane, yet carriers often fail to fully evaluate the impact they will have prior to a storm. Instead, they choose to focus on storm surge and coastal flooding. And, who can blame them? In times of catastrophe, all of us are reactionary and let oft-forgotten risks take a backseat to what we know. That’s why it’s important to embrace data and analytics ahead of a storm to make some proactive decisions. Those who do will become experts in hurricane risk mitigation.
What’s this about data and analytics informing my risk?
We understand that managing claims and organizing response efforts is no easy task, especially in the chaos of a live event. That’s where a centralized hub for data and analytics, like SpatialKey, comes in. Once a storm is imminent, users can track and monitor an event with near real-time updates—from the moment it’s forecasted until the last drop of rain—which helps insurers to:
- Reach out to policyholders in advance - As a storm looms, insurers can help policyholders prepare for an event and take action to reduce potential claims.
- Understand where claims are most likely to occur - With the right data and advanced analytics, users can devote necessary resources to where damage is expected to occur, with priority focus on those properties that may be most vulnerable to damage.
- Keep an eye on live events - Users can see where a storm has been and where it’s going with automatic updates coming from NOAA/NHC.
- Assess potential exposure - Immediately gauge how many accounts have been impacted, as well as your total insured value (TIV) and exposed limit in impacted areas.
And, once a storm has passed, its historical footprint becomes available to inform smarter underwriting. Data access and choice are crucial during underwriting, so we make sure our users have multiple opinions from industry leaders to inform their risk selection. Expert data from NOAA, NHC, FEMA, KatRisk, HazardHub, and Impact Forecasting, along with your own data, provide a more complete understanding of your hurricane risk at the point of sale. All of this means that, before you even issue a new policy at the point of underwriting, you can:
- Proactively manage risk - Pinpoint high-risk areas based on where a hurricane will have the most severe impact and where you have large risk accumulations.
- Leverage historical storm data - Analyze previous hurricanes to understand potential impact to new business if a similar event were to occur.
- Learn from previous experience - Visualize and analyze a prospective account and validate expert risk data in the context of your previous claims experience.
- Evaluate associated risks - See the impact of flood, wind, and tornado risk, which are at a heightened intensity during a hurricane, and how they will impact your portfolio.
- Understand portfolio correlation - Evaluate how correlated a prospective insured is to your current portfolio, and, its building characteristics, premium, and exposed values.
Advancements in data and technology are helping to more accurately estimate the impact of hurricanes, enabling insurers to organize response efforts before a storm strikes. With the ability to see how your portfolio would fare in nearly every associated peril from flood to wind, there’s no excuse for being unprepared. After all, it’s on you, the insurer, to come through when the unimaginable occurs, and you should be growing your business (not endangering it) when you take on the risk.
To learn more about this hurricane season and ensure you’re evaluating all of the risks, contact us today.