Insurtech accelerating climate adaptations in the insurance sector

In the wake of the unprecedented hailstorms that struck the Gironde region of France in June, French mutual insurance giant Covéa is trialing an AI-equipped scanning tunnel to streamline the car damage assessment and claims settlement process.

The tunnel Covéa is testing its capability of checking up to 175 vehicles for damage daily and promises significant time savings in the case of a mass event.

They provide a bespoke solution to a niche problem that reflects the progressive direction insurers are increasingly taking.

But Gironde isn’t the only area affected by extreme weather events this year, nor is France the only country signifying the increasing intensity and frequency of such incidents brought on by climate change.

As a crucial guardian of vulnerable communities, it is incumbent on the insurance sector to adapt to these new phenomena.

Therefore, the emerging Insurtech field provides sophisticated solutions to optimize efficiency and expedite claims processing and payments after natural disasters. 

As such, major industry players should follow the lead of forward-thinking insurers like Covéa and adopt innovative technologies.

This includes artificial intelligence (AI), Internet of Things (IoT), and blockchain, to ensure that weather-devastated communities are covered in their time of need.

Natural disasters on the rise

Although it cannot be directly blamed for causing natural disasters, climate change has increased its frequency, power, and cost.

Residents across France experienced biblical hailstorms, 113km-per-hour winds, and more than 190,000 lightning strikes in June alone.

Moreover, resulting in almost one billion insurance claims to contribute to national losses of €3.9 billion for French insurance companies. It’s a similar story in other parts of the world.

As usual, the US suffered the brunt of the damage brought on by natural disasters, accounting for almost half of the total $65 billion in global losses and nearly two-thirds of insured losses in the first half of 2022.

Meanwhile, Australia was inundated with catastrophic flooding costing $3.7 billion.

Pakistan suffered a heatwave with temperatures exceeding a blistering 50°C in May before monsoons flooded the country with three times the normal amount of precipitation, affecting one-third of its territory and 33 million of its people. 

The insurance sector must step up

Sadly, much of the world’s population lacks a safety net to catch them when the roof falls in, and the floor gives way.

According to Munich Re, insurance penetration is less than 10% in the developing world, meaning people are left without the financial help they need to get back on their feet after losing everything.

Indeed, even in places where coverage is more common, the sheer scale and frequency of disasters have left insurance companies struggling to keep up. 

Four months on from the hailstone deluge which decimated 97% of buildings in one Dordogne town – and with winter right around the corner – people are still waiting for claims approval and damage repairs.

Given the urgency of the situation created by increasingly frequent and costly natural disasters, as well as inadequate existing infrastructure, the insurance sector is increasingly looking to the rapidly growing Insurtech field to pick up the slack. 

IoT changing the game

Insurance companies can slash response and processing times with IoT while bolstering disaster monitoring services.

The number of IoT devices exceeded 13 billion in 2021 and is expected to more than double to 27 billion by 2025, with sensors offering insurers faster and more accurate data than ever before.

In the UK, FloodFlash has pioneered a network of home sensors to remotely detect flooding incidents and pay out claims within 24 hours of the damage occurring.

While Generali GC&C has partnered with flood alert company Previsico to pre-emptively predict the time and depth of potential events up to 48 hours in advance.

Moreover, IoT devices can help root out bogus claims more easily and effectively, allowing for the devotion of time and resources to the most affected individuals and communities.

IoT-connected drones provide aerial intelligence and add significant value to an insurance company’s arsenal.

Assessing the damage to disaster-hit, remote, or inaccessible places is a dangerous and laborious manual undertaking that drones can replace in a safer, faster, cheaper, and more professional manner.

According to analysis, drones can enhance the efficiency of roof inspection by 85% and increase speeds by up to 10 times, saving the sector as much as $7 billion per annum in the process.

Introducing them into insurance protocols as standard is a no-brainer, and many savvy organizations, such as Allstate, have already recognized this potential. 

Sealing the deal with blockchain

Blockchain is one final area of Insurtech that looks to revolutionize how policies are formulated, signed, and managed.

Famous for underpinning the cryptocurrency boom, blockchain is far more than a faddish system of counting Bitcoins.

Because every transaction entered into its ledger is immutable, transparent, and still anonymous, blockchain can play a vital role in repairing the reputational damage that the insurance sector has suffered in recent years.

For example, its watertight security could prevent cyberattacks such as the one which saw Anthem Insurance suffer a data breach for 80 million customers, resulting in a 2015 lawsuit worth $39 million.

Aside from enhancing security and fostering confidence, blockchain can also be useful in creating smart contracts capable of assessing circumstances and approving payouts without human intervention.

Munich Re is already taking advantage of this solution with its B3i initiative, which uses technology developed by Etherisc to underpin its hurricane protection policies.

Funds are released automatically when contracts receive intelligence of hurricane-strength winds within 30 miles of a policyholder’s property.

These innovations are just the tip of the iceberg regarding the plethora of ways in which technology can bolster the capabilities of insurance companies over the coming years.

In order to avoid being overwhelmed by climate change-driven natural disasters and the rising tide of insurance claims worldwide, the insurance sector must embrace InsurTech as a matter of urgency.

The economic survival of millions of people and their own balance sheets depends on it.

Have any thoughts on this? Carry the discussion over to our Twitter or Facebook.

Editors’ Recommendations:

• 5 Insuretech companies that are changing the game
• What security improvements does blockchain offer?
• Main challenges in IoT device management
• 5 must-have tech investments for business owners