Each year approximately 385 natural catastrophes on average occur worldwide. The financial cost of insurance losses reaches 75.82 billion dollars. Long-term insurance for high-risk properties becomes very costly, especially with the impact of inflation. These reasons brought the insurance sector to follow the developments in the world and try to adopt the property insurance trends to their operations towards natural catastrophes. That begs the question: What are the latest trends in property insurance for natural catastrophes?
How Do Natural Catastrophes Affect the Insurance Sector?
The expired valuation declarations harm the insurance sector with a merger with natural catastrophes that are becoming destructive and costly. According to the data published by National Oceanic and Atmospheric Administration (NOAA), 22 natural disasters occurred in the USA in the year 2021. For properties with a high risk of natural disasters in those regions, replacement costs in commercial property insurance contracts are affected by the inflation rates. The facts that the insured properties are outdated, and prices remained low due to inflation have negative consequences for the insurance industry. The emergence of unpleasant surprises, especially after the damage caused by natural catastrophes, puts the insurance industry in financial difficulties.
What Are the Trends in Property Insurance Towards Natural Catastrophes?
Insurance companies started to implement different models with the increase and frequency of natural disasters. If insurance companies aim to remain competitive and ensure particular standards in the years ahead, digitalization is a requirement. We can explain the latest trends that can help you take prompt action and use digital channels effectively:
1) Accelerating the Payment Period in Case of Need
The payment cycle duration is among the top factors that distinguish insurance companies. Property owners who have property insurance for natural disasters want to be paid faster in case of experiencing a situation. To prevent time loss in insurance payments, there is a need for technological infrastructures that accelerate the payment cycles. The future strategies of Munich RE, one of the biggest reinsurance companies in the world, depend on digitalization and innovation infrastructures. Companies predict that accelerating the payment will be possible with one-touch thanks to the digitalization with new technologies. In this way, payment management will be more effective with the easy accessibility of demands and payments by insurance companies.
2) Expanding the Credits with Risk Mitigating Incentives
The insurers who want to improve the property insurance for natural disasters can transit to a system that minimizes the loss and protects the policyholder by applying a complex risk modeling. That method also allows for expanding the pricing incentives. Insurers can focus more on risk mitigation or prevention by using predictive models available now from insurtech companies. Via data science and AI-driven models, educating property owners becomes easier and more accurate on what actions they can take to help protect the property. Wind shutters, vegetation clearing, and plumbing insulation can be examples of these risk mitigation practices.
3) Promising Open Communication
Data by First Street Foundation suggests that current migration tendencies will put 1.2 million properties at risk of flooding within the next 30 years, an increase of 10% compared to today. Meanwhile, those who want insurance for their properties against natural disasters started to research what advantages insurance companies offer differently. Insurance companies should prepare the policyholders for possible risk scenarios through AI-driven predictive analysis. Insurance companies can use data-driven technologies as promises as a strategy to gain new customers. That promise based on facts encourages new customers to approach the company and creates a sense of security. Promising open data-backed communication will start a new era of transparency between insurance companies and property owners.
4) First Notice of Loss with Digital Tools
In case of property damage, it is critical to provide the report by the insurance provider in the first place. Following a catastrophic event there is a significant surge in demand for field adjusters and claim inspections at impacted destinations. Immediately following NatCat events, insurance companies must move quickly to determine an estimate of the financial impact to their clients in order to cover claims payments. FNOL, as known as the first notice of loss, is the starting point for the formal damage procedure.
The first detection of the damaged property can be rapidly and correctly done with remote inspection tools. Using remote inspections during the claims process enables faster and more accurate damage estimation with less resources, which is critical during a natural catastrophe scenario. Another helper during the time of crisis is AI-driven claims analysis tools, which assess the FNOL and either automatically flag the claim to be resolved or notify the company that the claim is requiring further investigation. This helps the companies channel their human resources to the right cases quickly and efficiently.
Fast & Smart Solution for Claims Handling and FNOL: [VRS]™ Virtual Risk Space
Virtual i Technologies cooperates with insurers on assessing potential risks with an authentic and highly intelligent platform: [VRS]™Virtual Risk Space. [VRS]™ is a data-driven and technologically advanced system for insurance underwriting. Created by Virtual i Technologies, with [VRS]™ Virtual Risk Space platform the whole FNOL (First Notice of Loss) process can be digitized and can be triggered by the policyholders through their mobile devices easily. Please contact us for further information.