3 Challenges Facing Insurers in Hazard Risk and How to Solve Them

As climate change continues to make natural catastrophe events more severe and frequent, insurers are faced with many challenges in adjusting to the new normal. Insurers need to effectively assess the hazard risk of individual policies, understand potential losses from catastrophic events and estimate losses properly after severe weather impacts on their portfolio.

Here are three challenges facing insurers and the tools they can use to address them:

  1. Assessing the valuation of individual insurance coverages

More severe and frequent natural catastrophe events are putting more pressure on insurers to more precisely evaluate insured coverage limits. Insurers need a way to assess the risk of individual policies to determine the appropriate coverage.

Today, many insurers rely upon statistically-based average valuation methods. In a world that is fast approaching risk-based pricing, the average value is never the correct value, leaving an insurer with a value that is either too high or too low.

Risk assessment begins with using the best available property characteristic data, powered by artificial intelligence and machine learning imagery processing, to consistently value and rate all properties, followed by better hazard risk assessments that are more granular.

  1. Understanding potential and actual losses as a result of a catastrophic event

As events gain in frequency and severity, the likelihood increases of an insurer facing a major portfolio loss. To address this, insurers need to ensure that their catastrophe models are informed by the latest hazard modeling research and by accurate data on the structural characteristics of properties. Through loss simulation, insurers can get a comprehensive and granular look at the potential impact of major catastrophes.

Insurers need to deploy better catastrophe models that can tell them (1) how severe physical damages could be, (2) what the financial impact of such damages would be if they occurred, and (3) what damages actually occurred after an event. These pieces of information are key to making sure hazard risk is properly understood, and in this way, an insurance company can be properly capitalized and ready in the event of a worst-case-scenario.

  1. Verifying damages from increasing severe weather events

Insured losses from events like tornado outbreaks and severe convective storms are on the rise and can dent carrier portfolios more than expected. In most years, hail damage tends to be the costliest hazard for an insurer — and one that is also challenging to model. The increasing number of claims means an increased workload for adjusters to verify just where a weather event took place.

In an increasingly risky world, carriers will need to put additional focus on prevention and remediation. Understanding the severity and location of severe weather allows carriers to react efficiently and accurately when mother nature strikes. Hail, wind, lightning and tornado verification services are the key to better weather forensics and estimating damages within 24 hours of when they took place. Speedy turnaround time helps insurers reduce adjuster costs by deploying them only when absolutely needed while also increasing customer satisfaction by proactively reaching out to the customer after a disaster but before they file their claim.

Solve the Challenges

Tackling these three challenges is critical to making sure insurers are prepared for when disaster inevitably strikes. By using the best available data to assess individual coverages, using catastrophe models to understand portfolio losses from an event and using weather verification services to rapidly estimate damages and begin repairs, policyholders can rest assured knowing that their carrier is looking out for them.

To learn about CoreLogic solutions to these challenges, visit our hazard risk page.

© 2021 CoreLogic, Inc., All rights reserved.

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