How technology and a changed mindset can radically reduce flood risk and the insurance gap

By Dr Avi Baruch, Co-Founder and COO of Previsico

If you search Google for ‘insurance against natural disasters’, you’ll see that many insurance carriers and service providers still use the term to describe their products and services. However, ‘natural disasters’ has become a contentious term with a growing online #NoNaturalDisasters campaign to remove it from our vocabulary. The reason being that we possess the technology and the means to build resilience to hazards and mitigate their impact.

One by one, many insurers are removing it from their marketing collateral – a small but significant step forward. This issue is not just about semantics but also about changing our mindset to see risk management and disaster risk reduction as a crucial component of the insurance proposition.

The impact of a changing climate

Flooding is already one of the UK’s most damaging natural hazards and is Lloyd’s fifth largest global threat, risking $43 billion of GDP. With a more volatile climate and increased urbanisation, flood losses are expected to increase tenfold to $1 trillion by 2050, according to the WRI. The Royal Meteorological Society recently published a landmark report, outlining how the UK is already undergoing disruptive climate change with storms, floods, and heatwaves becoming more prevalent.

This is driving an expected five-fold increase in the frequency and magnitude of flash floods by the 2080s. The latest IPCC report – published 7th August – supports these findings, warning of a substantial increase in pluvial flood risk, particularly for towns and cities. All this points to a growing challenge for insurers to provide affordable cover. Yet, many of the flood impacts we see are entirely avoidable with the right technology in place.

Building resilience as part of the insurance proposition

Whilst the increasing prevalence and magnitude of flood risk creates significant challenges for insurers, including huge potential claims pay-outs and stretched loss adjusting resources, it also brings opportunities for growth in a highly competitive marketplace. Incorporating risk mitigation measures with underwriting is one way this can be achieved, including fit-for-purpose flood defences, property level resilience measures and next generation early flood warning systems that can be used to mitigate risk and thus, allow more insurance to be written.

Historically, un-insurable properties are now becoming insurable at a price point that is both competitive within the marketplace and affordable for the customer. These measures can also help to support existing clients, ensuring they are prepared for future extreme events, resulting in improved client retention. The ability to adapt to increasing future risks will support increased resilience for insurers, allowing them to build and prosper in an uncertain world.

Surface water is catching people by surprise

Following the recent devastating flash floods across central EU, UK, China, and India, the fragmented flood warning systems in place were cited as a major impediment to mitigating flood impacts and losses. Many individuals who had never previously experienced flooding have been caught off guard, with the lack of warning and preparedness cited as hampering abilities to mitigate impacts and losses. While measures are being taken to improve flood defences for rivers in many places globally, surface water flooding remains the UK’s greatest and Europe’s fastest-growing cause of floods.

The challenge with existing forecasting technologies is that every storm is different, with hourly changes in weather patterns making them challenging to predict. Countries including the UK are benefiting from advances in rainfall forecasting technologies, yet these form just a small part of what is needed to produce actionable flood warnings, with flood driven by a range of environmental factors beyond rainfall, including (but not limited to) drainage availability and condition, ground water saturation, and ground surface permeability.

However, with the availability of new, next generation flood forecasting technologies, we can now reliably predict the extent and temporal persistence of surface water flooding at the property scale. Importantly, the response of local catchments to storms, each of which are unique, requires continuous, real-time modelling to generate effective early warnings for flash floods – and relevant technologies are now available through Previsico. Leading insurers such as Zurich have seen the opportunity and are working in partnership with Previsico to mitigate losses for major client BT.

Using IoT in early warnings

At Previsico, our mission is to minimise the impact of flooding globally by delivering pioneering, world-leading flood forecasting technology to those who need it. With a special focus on the insurance industry, we can significantly reduce the cost of flooding for people and organisations globally by supporting proactive measures to reduce flood impacts.  However, even the most sophisticated forecasting systems are not always 100% accurate and it is for this reason that Previsico have piloted a new, premium solution to address the increased risk of surface water flooding.

The new system utilises IoT sensors placed in strategic locations – including culverts, streams, or small rivers that are prone to flooding. Data is then fed-back live to Previsico and ingested by our hyper-accurate forecasting models to provide an unprecedented degree of accuracy and timeliness. It is a game-changer for insurers and their customers, worldwide.

Follow us on twitter: @risksEmerging

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