General Insurance Article - Building resilience against weather losses


The season of ‘mist and mellow fruitfulness’ quickly gave way to what seemed like endless days of rain in the Autumn of 2019, with rainfall reaching record levels in some parts of the UK and flooding hitting homes and businesses. It may seem hard to believe but nationally, the rainfall of Autumn 2019 is yet to beat the December 2015 deluge.

 Jonathan Guard, Director, Commercial Markets, LexisNexis Risk Solutions, UK and Ireland looks at how insurance providers can predict and prepare for weather related losses

 Flood Re for home insurance customers was introduced the following April to replace the previous Flood Insurance Statement of Principles and since the scheme was set up, over a quarter of a million homes across the UK have benefitted . The British Insurance Brokers' Association (BIBA) launched a commercial insurance scheme in 2016 aimed at improving access to flood insurance for SMEs in flood risk areas. 

 The need to price effectively and appropriately for flood risk in both home and commercial lines remains a key priority for the market as flood events become a regular feature of our annual weather patterns. The good news is that in four short years since the devastating floods of winter 2015, the home and commercial property insurance market’s understanding of flood risk has continued to evolve through enhancements to technology and new data insights combined with geo-spatial visualisation techniques.

 Today, insurance providers have access to data on the property, the policyholder and the location to create a real-time understanding of risk right down to the individual property and even whether flood risk differs from the front of the building to the back. Added to this, mapping tools are making it easy to see where accumulations and exposures lie across a book of business to help determine pricing strategies and manage losses as events unfold.

 With the automation of home and commercial property products, the same insights at a property level via map visualisation tools are now available as scores in the automated data enrichment world. This means, for example, that a home located at the top of a hill will not be classed as having the same risk as a property in a flood valley, just because they happen to be in the same postcode.

 Real-time warnings
 Flood risk assessment is moving to real-time, with recognised bodies such as the Environment Agency and some of the flood modelling companies, now publishing geo-spatial flood alerts in fifteen minute intervals. This enables insurers to assess which customers are at risk and helps them to provide guidance at the appropriate time. It means insurers can now include added value services to help their customers take preventative action and help reduce the impact of flood events.

 Let there be light
 LiDAR (Light Detection And Ranging) technology has had a significant part to play in these advances, helping us to model for flood based on the local terrain.

 Using the pulse from a laser to collect measurements, LiDAR enables 3D models and maps of ground to be created, showing buildings, trees and water levels. The data has been collected for the whole of the UK, bringing a new depth of knowledge around environmental risks.

 As the data collected can be coupled with soil type, average rainfall and river gauge monitoring, LiDAR is proving particularly valuable in its ability to accurately predict where water will go in a flood. It can also be used to show effectiveness and any potential consequences of manmade flood defences. With £62 million in funding to be awarded to 13 projects to improve flood defences , the data gathered by LiDAR may help the insurance sector understand the precise impact of these measures on insurance risk.

 Looking back to help predict the future
 In addition to the real-time information, insurers have access to historical flood and claims data, adding a further dimension to the picture of risk. Already the market has access to flood data going right back to 1946. However, a gap in the market that has yet to be filled is a claims database. This could provide a history of claims events for a property which the insured may not be aware of when applying for insurance cover. With this insight, insurance providers can make a much more accurate risk assessment, putting them in a stronger position to support customers before, during and following a flood.

 We know more accurate weather predictions are helping to put the sector on guard for flood events. When it comes to assessing flood risk at point of quote, renewal and during the lifetime of the policy, the combination of data now available to the insurance market continues to grow, helping to ensure no homeowner or business is left out in the cold through any lack of understanding of their risk.

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