By Jonathan Jackson, CEO of Previsico
As world leaders meet in Glasgow for COP26 to discuss the impact of a changing climate and agree on ways to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change, insurers are largely left to carry the can.
The risks are many, from fire to hurricanes, wind, and flooding – and the costs are huge. This article focuses onflooding, which is already one of the UK’s most damaging natural hazards and is Lloyd’s fifth largest global threat, risking $43bn of GDP[i].
With a more volatile climate and increased urbanisation, flood losses are expected to increase tenfold to $1 trillion by 2050, according to the WRI[ii]. All this points to a growing challenge for insurers looking to provide affordable cover. Yet, many of the flood impacts that we see, including from surface water flooding, are entirely avoidable with the right technology to mitigate risks 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, as more people seek insurance.
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, thus allowing more insurance to be written.
Historically, uninsurable properties are now becoming insurable at a price that is both realistic for insurers and affordable for customers, so helping to close the protection gap. These measures also help to support existing clients, ensuring they are prepared for future flood events, resulting in improved client retention.
Surface water is catching people by surprise
Following the devastating flash floods across central EU, UK, China, and India earlier in the year, 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.
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 now benefiting from advances in rainfall forecasting technologies, yet this forms just a small part of what is needed to produce actionable flood warnings.
However, the availability of next generation flood forecasting technology means that we can now reliably predict surface water flooding at an individual property level. 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
Our mission at Previsico is to minimise the impact of flooding globally. With our technology, we are now able to significantly reduce the cost of flooding for people and organisations, worldwide, by delivering live actionable warnings, which support proactive risk mitigation measures.
This said, even the most sophisticated forecasting systems are not 100% accurate, which is why Previsico has piloted a new solution to address the increased risk of surface water flooding, utilising IoT sensors placed in strategic locations, including culverts, streams, or small rivers prone to flooding.
Data is fed live to Previsico and ingested by our hyper-accurate forecasting models to provide even greater accuracy. With climate change not going away anytime soon, it is a game-changer for insurers and their customers, worldwide.