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New forecasting technology can reduce claims costs

How flood prevention technology can impact claims management

Late last year, Boris Johnson discovered the consequences of flooding after he was harangued for his response to flooding in South Yorkshire. These events and the warnings that followed reflected the growing prevalence of flooding driven by climate change and increased urbanisation, neither of which show any sign of abating.

Around 5.4mil properties in England are currently at risk of flooding from rivers, the sea and surface water, with annual flood damage costing the country an estimated £1.1bn. Many of these properties, mostly commercial and HNW residential will be protected with the support of professional insurance brokers seeking better solutions for their customers.

Despite the criticism from some quarters, the UK Govt. takes the issue of flooding very seriously, with the Environment Agency having £2.6bil budgeted for flood defences between 2015 and 2021, aimed at protecting 300,000 homes across 1,500 projects.

Perhaps surprisingly, flood risk affects 2.4mil from the sea and rivers, but a greater number, some 3mil from surface water, flooding that is historically much harder to predict, which is why Previsico was set up last year with the support of the UK Government’s Cabinet Office.

New technology, new solutions

The good news is that new technology and innovation is changing the flood risk landscape, for the better.

For instance, InsurTech True Flood Risk’s elevation data accurately assesses and prices an individual property’s flood risk. While flood warning systems such as Previsico’s 48-hour flood forecasts provide alerts for individual properties. These alerts can be used to trigger the activation or setting up of flood defences, where there has also been significant innovation.

Flood defences, what’s new?

To many, flood defences are just sandbags that are heavy, awkward and slow to set up. Fortunately, however, new technology in flood defence has produced a wide range of systems, including automated defences that are quick and easy to activate.

These range from barriers triggered by flood water through to flood doors. Such systems can be set up within minutes and provide robust protection from even the most severe flooding.

Increasingly, flash flooding hits properties that have not experienced flooding before and so are unlikely to have flood defences. In these cases, flood warnings can be used to alert customers to move their assets to safe places or to take simple actions such as turning off electricity to reduce machinery damage and business interruption losses.

Back in 2017, Hurricane Harvey produced floods up to 1.5m deep in Houston, which triggered about 1million auto claims, as it is much harder to protect vehicles with flood defences. However, street level flood forecast data now shows where it is safe to park, often just one or two streets away; a quick and easy way to avoid losses.

Parametric flood insurance

Innovation in parametric insurance is already changing how the industry and customers view flooding, as it now enables people to buy insurance protection, including in high risk areas, where it was not previously possible.

One good example is Tonbridge Juddians RFC, which lies by the River Medway, which is prone to flooding. They went uninsured for several years until Parametric insurer FloodFlash came along to offer a viable solution.

Parametric insurance offers businesses a simple and easy solution where they can be insured against a predetermined flood level. Once the level is exceeded, the insured sum is automatically paid out, so it is clear to see why FloodFlash’s model is so attractive.

Another route to swift claims payment

For brokers looking to protect their clients with a more traditional insurance solution there is an alternative route, which ensures the swift resolution of claims. This is to make use of Previsico’s highly accurate real-time flood forecasts.

These forecasts enable insurance professionals to quickly understand which streets have flooded, so that claims can be processed quickly and efficiently by claims adjustors. The forecasts can also provide the emergency services with accurate street-level information so they can gain quick access to areas suffering from flooding, which can also help to mitigate losses.

Reducing risks and losses

The combination of new technologies mentioned means that underwriters can now write flood policies using the combination of elevation data, flood warnings and defences in the same way they use locks, alarms and safes for underwriting buildings and contents insurance.

For policyholders, the cost of an alarms is similar to the combined cost of property data, flood warnings and defences. Better still, in November the Government announced grants up to £5,000 for homes and business that had flooded. This opens a new market opportunity for brokers to work with insurers on reducing risk and losses for customers.

More broker opportunities

Indeed, breakthrough flood technologies present a raft of opportunity for brokers. With simple technology integration, for instance, meaning that data from True Flood Risk and Previsico can now be available to customers along with other services from a broker on one screen.

Furthermore, broker services can be enhanced by combining this new data with existing data, such as customer property location data from data supermarkets, such as WhenFresh, to create a valuable new service to better assess customers’ risks.

Looking ahead, according to Guy Carpenter, “the flood market potential is over five times the size of the most often mentioned new market, cyber insurance.” Brokers seeking to grow and offer better service to their customers should therefore embrace these new technologies to unlock valuable, growing market opportunities, placing flood risk and insurance at the top of their list.

This Blog was first published, in edited form, on Insurance Age: