Predict and Prevent
The increase in insured losses in recent years is dramatic.
Changing weather patterns and a rise in extreme weather have hit carriers hard. The industry saw over $100 billion in insured losses from natural catastrophes alone in 2022.
Traditionally, the insurance industry has taken a “repair and replace” approach to claims, but losses of this magnitude have shown there is a clear need for a transition to a more proactive, “predict and prevent” approach, especially as the frequency and severity of natural catastrophes increases. And while weather is certainly the most notable driver of this shift, The Hanover’s Dick Lavey, executive vice president and president of Hanover Agency Markets, says there are also other factors at play. For carriers, “the inflation and supply chain issues that we’ve experienced in the last two years absolutely have exacerbated the total costs.” He adds that recent natural catastrophe losses have also contributed to much more expensive reinsurance, which in turn pushes premiums even higher.
“The last three years have really put this issue front and center,” says Lavey. “We as a company and as an industry are shifting toward an improved model, in partnership with our agents, helping customers monitor and identify exposures, and hopefully preventing losses. Fortunately, technology has evolved and datasets that help us understand where the risks lie have become more obtainable. And when you put all that together, it’s going to increase adoption of this concept of predicting and preventing claims.”
Technology Enables Proactive Stance
While tools such as sensors are already in use, Lavey emphasizes that advances in their cost and ease of use now allow for a much more proactive risk management approach. Smart sensor kits in particular have become much easier to implement, he says, and with simple monitoring, are “very effective at helping our customers understand what’s going on at a property when they’re not there.”
Other tools include online interactive toolkits that can help businesses identify ergonomic risks in workers, such as awkward worker mechanics or forceful motion. These toolkits help create a plan to prevent losses from causing wear and tear on the body that leads to injury. Infrared cameras are used to determine if there is moisture behind a wall. Another tool, when plugged into an electrical socket, provides information on surge issues or if the electrical panel is overburdened.
Education and Understanding Customer Needs Is Crucial
But technology alone won’t produce the necessary change, and that’s why bringing clients on board is paramount. Lavey cites a case involving a Hanover customer, the University of Findlay, in which water detection sensors identified a break in a water feeder line right above a storage unit in the university’s art museum. “Within 15 minutes, the person who monitors the property was there to shut off the water and save the loss of valuable art, preventing a six-figure loss.”
Lavey points out this example demonstrates the importance of having working sensors and a customer contact who understands how the sensors function, since the system works by sending alerts to a cell phone. “If the sensors are in place and we have the right person on the job, we can prevent extensive damage, the loss of valuable property, and costly claims.”
Opportunities for Agents and Brokers
Helping clients understand their exposures also plays a key role in predicting and preventing losses. By holding risk conversations and regular check-ins, brokers can help insureds understand potential new exposures, and then leverage that newfound understanding to create plans that address risks and build disaster recovery plans that will enable customers to get up and running again as quickly as possible should they suffer losses.
Ultimately, for client education to truly succeed, Lavey thinks agents must work together with their carrier partners. “As an insurance company, we can do our part, but we also have to rely on our agent partners. They play important roles in risk management, particularly for those types of companies that can’t afford to have an onsite risk manager,” he says. And for smaller agents who don’t have on-site risk management or claims resources, carriers can come in and play that role for them, he adds.
Through this kind of partnership, carriers, agents and their clients can work together to predict and prevent losses that might otherwise cause significant financial loss and business disruption.