Many insurers are beginning to incorporate artificial intelligence to assess climate risk to homes. One notable example is Amica Mutual Insurance.
Based in Lincoln, R.I., and San Francisco, Amica announced July 30 that it is expanding its partnership with ZestyAI, which uses AI to assess climate and property risk. Amica says it will now use ZestyAI’s AI-powered climate risk models that evaluate both the hazard and vulnerability of hail and wind damage, as well as a property risk assessment tool. Amica will integrate these new predictive analytics models into its AI platform, which already assesses wildfire risk assessment.
ZestyAI’s models examine the interaction of climatology, geography, and the unique characteristics of every structure and roof, analyzed in 3D, including accumulated damage from historical storms. The models are based on science and experimentation by researchers, including the Insurance Institute for Business & Home Safety (IBHS), and are trained on huge amounts of loss data. ZestyAI’s models allow insurers to assess risk property by property, rather than by larger regions.
More Catastrophic Weather Events
According to a July 1 report from McKinsey & Co., investors and regulators are increasingly demanding that insurers better understand their climate risk exposure and be ready for abrupt changes in climate patterns.
The report said that from 1980 to 2010, the United States faced an average of five severe natural catastrophic events (having an inflation-adjusted $1 billion in damages or more) annually. “Between 2011 and 2022, that number had tripled to an average of 15 per year, according to data collected by the U.S. National Oceanic and Atmospheric Administration. Twenty-eight such events occurred in 2023,” the report said.
The most sophisticated insurers are working to “fundamentally restructure their models, increase premiums, and shrink their exposure in certain areas, or even stop providing coverage altogether as several of them have recently done in California and Florida. At the same time, the nonadmitted property market in the United States is growing 20 percent annually, as customers are increasingly forced to pursue higher-cost, nonstandard property coverage.”
As a result of the risks, insurers are investing in advanced climate analytics, especially in combination with access to third-party data.
