Hail risk in 2023: A forecast for insurers
Jan 2023
A forecast for hail risk conditions in 2023 for P&C insurers, and a recommendation to work with third party geospatial insurtechs to combat hail risk.
Jan 2023
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Since this post was originally published, Betterview was acquired by Nearmap. References to Betterview, the company, or its products have been maintained for historical accuracy. Betterview is now the primary solution for the insurance industry at Nearmap.
Entering 2023, hail damage continues to be a significant concern for property & casualty insurers. This story should be familiar to anyone paying attention to current trends in global risk. Due to several factors – including but not limited to the effects of climate change – damaging weather events have become more difficult to predict while worsening in frequency and severity. Cyclones and bushfires have received the bulk of news coverage, but insurers should also note the increase in hail activity.
THE NATURE OF HAIL RISK
In order to form an effective response to potential hail damage, insurers should first understand the nature of the risk: how it impacts homeowners and policyholders, which properties are the most vulnerable to damage, and what costs are likely to be accrued.
Unfortunately, existing solutions are insufficient to craft a holistic and proactive approach to hail risk. These products focus almost exclusively on regional peril data, with limited consideration of property-specific vulnerability. They are also often lacking in transparency, unable to show underwriters, agents, and policyholders the exact factors contributing to increased hail risk.
GETTING AHEAD OF HAIL
An effective hail risk solution needs to consider both regional hazard data and property-level vulnerability. These two factors – hazard and vulnerability – work together to form a complete picture of risk.
Hazard indicates the likelihood that a given property will experience a hail event; for example, properties located in the hail-prone areas will have a higher level of hazard than elsewhere in the country.
Vulnerability, on the other hand, refers to the amount of damage a property is likely to experience during a hail event. Vulnerability is influenced by several factors, including the age, material, and condition of a roof.
Together, hazard and vulnerability indicate the exact level of hail risk on a given property. However, this information can only be effective if it is accessible to actual insurance professionals. Underwriters and claims professionals need solutions that integrate with their existing workflows and do not require an unsustainable amount of training and IT resources. Any company building such a solution should strive to make it as transparent and easy-to-use as possible.
There would be many advantages to insurers in using such a solution, as it would:
- Optimise risk selection and reduce loss ratios, allowing companies to expand business in hail-prone regions while maintaining profitability.
- Automate underwriting decisions and property inspections, optimising efficiency and reducing expenses.
- Proactively communicate with insured about hail risk and recommend mitigation strategies, building a stronger relationship and minimising damage when a hail event does occur.
Insurers should not underestimate the impact of increasing hail damage on their business. If they continue to rely on old strategies for managing risk – strategies which do not take into account the evolving, dynamic nature of risk – they will lose business to those companies willing to adapt and explore innovation.
Dive deeper with Hail Risk Insights with Betterview.