How do you mitigate losses from extreme weather events?

By Jimmy Engstrom  |  October 17, 2011

For many insurers, 2011 will go down in history as one of the costliest years ever for weather-related losses. In the spring, we had deadly tornadoes and powerful hailstorms. Later on, it was wildfires, tropical storms, and hurricanes. By the end of June, the industry had suffered an estimated $23 billion in direct insured losses (before reinsurance recoveries) from weather-related causes. That number is approximately three times the first-half average for the past ten years. And it doesn’t even include some $3.6 billion in losses from Hurricane Irene, which struck in August.

You can’t control the weather, but your company can minimize its exposure and reduce loss adjustment expenses by using information and analytics available on the market. Geographic information systems (GIS) technology lets you quickly understand your exposure to risk in a given area. You can then use business rules to stop writing new policies in areas where you believe you’d be overexposed in the event of a disaster.

GIS systems also let you use location-specific data — such as weather information — to help you mitigate property damage and process claims faster and more accurately. Using real-time weather feeds within a GIS system to track storms, you can alert your policyholders before a potential event and advise them to take steps to minimize property damage.

To reduce loss adjustment expenses and speed up claims processing, you can take advantage of location-specific weather analytics. You can get high-resolution information on hazards such as hail and rain in near real time. For example, immediately after a hailstorm, you can find out the size of the hail, the storm’s exact track, and which of your policies were within the track. With that information, you can anticipate the number of claims you’ll receive, optimize deployment of your adjusters, and identify possible fraudulent hail claims.

All property insurers are exposed to the unpredictability of severe weather. But with GIS technology and weather analytics, you’ll be in a better position to understand and mitigate the risk. You’ll also be able to provide superior claims-handling service for your customers —and reduce your processing expenses.

Verisk is committed to providing cutting-edge risk management tools for the property insurance business. We invite your feedback. What are your comments on this blog post and your suggestions for mitigating extreme weather losses and managing the claims process?

Jimmy Engstrom

Jimmy Engström is assistant director, product development, ISO Insurance Programs & Analytic Services. Mr. Engström has held numerous product and marketing roles within Verisk Analytics and holds the Associate in Risk Management (ARM) designation.