A few raindrops on your windshield might mean an additional twenty minutes on your I-95 commute, but, according to a 2018 Intergovernmental Panel on Climate Change (IPCC) report analyzing the relationship between climate change and extreme weather events, the effect of rising CO2 levels—from severe heatwaves, heavy precipitation, coastal flooding, and coastal erosion—could be much more consequential.
Predictably, analysts are already forecasting increases in auto premiums—with reverberations throughout property and casualty (P&C) insurance no doubt close behind.
There is a ray of hope on the horizon, however: From risk and climate assessment and modeling to claims processing and customer engagement to aligning organizational objectives with climate-focused company vision and mission through an objective strategic decision-making framework, tech is evolving to meet the coming premium challenge.
First, let’s examine three areas of concern:
- Rising reinsurance costs. When primary carriers need to protect themselves from catastrophic loss (like hurricanes and other natural disasters), they purchase reinsurance. It’s an essential component of the Florida insurance ecosystem and, when purchased from reinsurers, these carriers distribute the cost to customers through higher premiums. As the frequency and severity of natural disasters increase, it raises our regional risk profile, which means reinsurers charge more for coverage, causing carriers to cover the cost by increasing premiums.
- Sea levels rise, insurability falls. CEO & Chief Scientist of Climate Central, Ben Strauss, states, “Global average sea level has gone up about 8 inches since 1880.” Strauss continues, painting a pressing picture of urgency, “Making the odds of a South Florida flood reaching more than 4 feet above high tide, by 2050, on par with losing at Russian roulette.” Mounting flood concerns from carriers means an increased risk of property damage, a drop in property value for locations less inland, higher premiums, and risk selection.
- Operation Interruptions. COVID-19 exposed us all to the frustrating hold-ups of supply chain disruptions. In the coming year, extreme weather events will exacerbate issues for transportation networks and the delivery of goods and services. This disruption translates to higher consumer goods costs and promises to cost the commercial sector in interruption coverage and increased premiums. But a secret weapon lies amidst risky forecasts and clouds of uncertainty—ready to help carriers chart a clear path toward continuous success.
“Are you telling us that the insurance industry is treehuggers now that they’re advocating for the environment?”
This is the good-naturedly provocative question OZ Chief Transformation Officer Dr. Paul Bailo puts to InnSure Executive Director Charlie Sidoti on a recent episode of the OZ podcast Transformation Matters.
“It’s in their best interest,” Sidoti responds. “I’ve always been environmentally conscious, but it’s not just about doing good for the sake of being a good person. The UN suggests that there’s going to be $5 trillion a year spent on climate. Suppose Property & Casualty (P&C) captures 2% of the global economy. In that case, we stand to capture $100 billion in new business.”
And, indeed, OZ—as part of its mission to empower businesses of all sizes through accelerated growth—has partnered with InnSure on its Climate and Risk Insurance Sandbox (CRIS) initiative, which seeks to “support the insurance industry of the future and respond to the challenges posed by climate change” through digital transformation.
Whether it be in data and analytics (DA), artificial intelligence (AI), robotic process automation (RPA), or beyond, OZ will lend its expertise in optimizing technology infrastructures for automating processes, providing real-time data to enable informed decision-making, and improving customer experiences for world-changing insurance solutions.
“Growth, innovation, transformation, and creativity are key ingredients to allow the insurance industry to continue to grow and prosper,” Bailo says, adding InnSure “provides all these and so much more.”
OZ has led the charge in multi-industry solutions for over a quarter-century. Take the next step toward transitioning from a season of ambiguity to one of market-defining innovation by contacting us here.