While insurers have always had to manage the impact of natural disasters on their bottom lines, the intensification of storms and the reality of a year-round fire season is making it even more difficult to underwrite policies accurately. Artificial intelligence (AI) is helping insurers asses risk and underwrite policy with more accuracy. With disaster season just around the corner, it’s important for insurers to assess the homes and policies they currently have for risk and explore other ways to implement AI solutions, like disaster awareness. Read on to learn more.
Social Proves Savior During Disasters
A lot happens on social media from trending memes to virtual crazes, but what about public safety awareness? A research paper from Arxiv.org titled Integrating Social Media into a Pan-European Flood Awareness System: A Multilingual Approach, using social media to alert the community of flood risk was explored. It was found that using Twitter enriched flood awareness and real-time reports. This study compliments research completed by Harvard, Google, and Facebook with the use of AI and social media for disaster awareness.
“Over the past decade, social media has emerged as a relevant information source during disasters, prompting researchers from diverse areas to converge on this domain,” the paper’s coauthors wrote. “Social media analysis has demonstrated the potential to provide timely, precious information about the spatial and temporal development of a crisis, as well as supporting the identification of key disaster-related events.”
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Mike Hofert, Managing Director of Insurance Solutions at Pitney Bowes, joined us to explore how AI tools are impacting the insurance industry, specifically in the way companies underwrite. Intelligent, AI-based, underwriting tools have enabled insurance companies to utilize high-quality data, analysis, and insights to create a unified dashboard that provides a more complete snapshot of risk exposure.
“By putting data to work an insurer can improve the overall quality of their underwriting efforts by identifying key exposures that might otherwise have gone unnoticed but that need to be addressed and factored into pricing,” said Hofert. “Underwriters have traditionally spent a lot of time gathering data about environmental hazards in addition to information about a property’s value, structure, and issues to do with proximity to other neighborhood features or hazards.”
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Homes Underinsured Against Disasters
In recent years, the cost of labor and materials for homes has risen due to construction labor shortage and tariffs on materials. Insurers that are not factoring these costs into insurance coverage in disaster-prone areas may be left with homes that are underinsured. For example, if just 1 percent of the California homes at risk for a wildfire were lost, the given increase in reconstruction cost over the past two years would have an insurance undervaluation of $25 million.
These changes should be top of mind for insurers and push them to recalculate coverage on homes that could be potential total losses in a natural disaster. After all, last year alone cost the United States over $91 billion due to natural disasters, according to the National Oceanic and Atmospheric Administration.
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