A Changing Environmental Landscape Impacts The Insurance Industry

By Author: D Edward Levy
Total Articles: 27
Comment this article

The phrase climate change simply refers to the changes in climate factors such as temperature and precipitation but over the last decade, the phrase has become much more polarizing, politicized and divisive. Non-scientific arguments aside, extreme weather events and natural disasters are increasing in number and severity and the effects of these events are causing more property damage in both commercial and residential spheres. Rising global temperatures can be attributed to the increase in damage causing storms and destructive wildfires. Insurance companies are seeing rising payout costs as an effect of climate change as more claims are submitted to cover losses from these events. As controversial as the phrase climate change is, insurance businesses and carriers are experiencing climate change first hand with increasing claims and losses as a direct result of weather and environmental events.

Climate Change and the Insurance Business

2024 saw some of the most intense and destructive environmental events seen in the last decade. Major wildfires in California decimated over 35,000 acres while Hurricane Helene caused ...
... over $77 billion in damage in the Southeastern States. In total, insurers paid out $140 billion in claim, marking 2024 the fifth costliest year since tracking began in 1980. A majority of the losses are centered in North America but Europe and China have seen significant storm and flood activity, contributing to the high worldwide total. Effective and aggressive premium revenue management is a key factor in mitigating losses created by catastrophic environmental events. Premium revenue management also impacts carrier profitability and adapting a Dynamic Premium Pricing Model (DPPM) can positively impact premium revenue streams with more opportunities to optimize and review client premiums.

Adapting Innovation to Help Manage the Problem

A new technology from TTS aims to help insurance companies cope with increasingly destructive weather and environmental catastrophes. ClimAIteTRACK combines data analysis, proprietary algorithms and machine learning loops to provide an in-depth climate evaluation for a specific region or locale that can be used to determine and validate client premium increases. Using historical and current climate data points, ClimAIteTRACK tracks changes and values and identifies trends within each data point. Changes and totals are applied to a grading system and establishes an ‘Environmental Assessment Grade’ (EAG) for that specific area. Based on the location’s EAG, ClimAIteTRACK can recommend premium increase strategies on yearly renewals or can be used with a Dynamic Premium Pricing Model for quarterly or monthly reviews. ClimAIteTRACK creates robust internal reports as well as generates client facing reports that can be vertically integrated into in house billing systems.

Delivering Significant Business Benefits

ClimAIteTRACK is a new tool that gives insurance companies the ability to quickly analyze and evaluate a specific area’s climate status and strategize client premiums. ClimAIteTRACKS’s core functionality delivers 3 significant benefits to insurance businesses:

Optimize and increase premium revenue on a more frequent basis through the DPPM
Acquire larger premium increases on yearly reviews
Build client confidence and loyalty with ClimAIteTRACK’s consumer facing reports and the easy to understand Environmental Assessment Grade

ClimAIteTRACK is designed as a powerful tool for insurance companies to acquire relevant data and analysis on climate data points to maximize revenue opportunities and partially mitigate potential future costs related to severe weather damage.

ClimAIteTRACK, A New Tool for Insurance Businesses

Politicians and pundits may argue over the merits of climate change but there is no debate in the insurance industry that climate change does exist and is intensifying weather and environmental events. The increasingly destructive nature of storms and wildfires are driving up claims related costs for insurance companies as commercial and residential losses continue to mount. Using data, insurance businesses and carriers can help mitigate potential future claims by adopting a Dynamic Premium Pricing Model for their clients, utilizing ClimAIteTRACK’s data capture, analysis and grading functionality. ClimAIteTRACK is a powerful tool for insurance companies to analyze and gauge past and potential future risks and calculate client premiums accordingly. ClimAIteTRACK’s client facing functionality provides clear transparency and builds customer confidence and loyalty in the face of rising commercial and residential property insurance premiums. For more details, please visit the microsite: https://climaitetrack.com/