Insurance sector braces for another severe hurricane season
Hurricane Beryl, the first big storm of the 2024 hurricane season, set records for how quickly it grew in destructive power. For this point in the season—which lasts from June to November—the storm started out unusually large and unusually far out to sea.
And according to several forecasts for the remainder of the season, more big storms are likely.
With what could be a record-setting hurricane season, the insurance industry is using some tools to prepare for and weather the storms. These five tools are helping place risk and communicate that to clients.
2024 storm predictions
The National Oceanic and Atmospheric Administration says there’s a high chance that 2024 will have an above-average hurricane season. The organization predicts the next few months might see the return of a La Niña weather pattern, which tends to bring a more active hurricane season.
In the last La Niña year, in 2022, Hurricane Ian killed more than 100 people and caused catastrophic amounts of damage. The insurance industry paid out between $53 billion and $74 billion, according to an estimate by risk modeling company RMS.
The National Flood Insurance Program received more than 44,000 flood claims from hurricane Ian and paid $437 million to policyholders.
So what are the expectations for this year? According to the Colorado State University Tropical Weather and Climate Research, which updated its annual forecast last month, there could be a record number of named storms hitting the U.S.
For the insurance industry, which is already experiencing a hard market, this storm season could be devastating.
Long-range forecasts help insurers price risk
The forecasts mentioned above are becoming more and more reliable, thanks to advancements in weather computer models and machine learning.
In some cases, individual storms can even be spotted well before they happen, as the conditions that create hurricanes develop.
From an insurance perspective, this predictive power shows the value of technology and data science in allowing insurers to prospectively price risk and support efforts to prevent costly claims.
Flood map updates
FEMA’s flood maps help identify the flood risks of geographic areas around the country and determine what areas require building owners to carry flood insurance.
In coastal areas, these maps are especially useful for placing risk on existing buildings or preventing further development as climate risks change.
Each community’s map is updated every five years. Recently, updated maps in California put some structures in high-risk areas for the first time. And an update in Southern Florida added 138,800 to flood hazard areas.
For agents, these flood maps go a long way in helping clients understand their own risk.
Risk references: How insurance companies plan for hurricanes
As storms and climate disasters change the landscape of risk, insurance knowledge databases are rapidly becoming favorite tech tools for agencies looking to get up-to-date information that helps them place risk.
These databases might contain industry trade publications along with risk assessments for geographic locations, insurance type and property type. Altogether, this information helps agents dial in and place risk, and help inform clients about up-to-date, real-world information that affects them.
Innovative technology: Drones aid in the claims process
Aerial drones are becoming more and more useful for commercial purposes. The insurance industry has been making use of drones for several years, but better cameras, longer running times and cheaper prices are making them more useful than ever.
After a mass disaster like a severe hurricane, drones can turn boots on the ground into eyes in the sky to safely and quickly assess damage from all angles without putting any people at risk on damaged structures.
And since roofs are most likely to see damage in storms, drones can help mitigate risk by helping spot structural hazards or perform inspection before a claim happens.
Record preservation—to protect clients and yourself
Hurricanes bring significant damage and floods. That damage can cause lost records for customers or for insurers.
Smaller insurers in hurricane-prone areas face their own storm risks as well.
By turning to digital records, instead of relying on hard copy processes, insurers can streamline claims processes and protect against lost information, which could then become a privacy risk.
Tropical storms and hurricanes could make for a rough few months for the insurance industry, but InsurTech solutions that help place and mitigate risk, speed up the claims process or digitize client records could help both insurers and insureds.
