The risk for climate change is growing, meaning sea levels are rising and extreme weather events are more common. Therefore, insurers use location intelligence software to optimally prepare for climate change. TWT Business Solutions shows insightfully what companies could learn from the use of location intelligence software to succeed in business.
Unfortunately, many people still underestimate the effects of climate change, but the risks are real. Emerging challenges of residents in crisis areas, such as those who live on coasts, create new opportunities for insurers to offer innovative solutions when focusing on minimizing the risk for coastal residents by offering innovative solutions based on location intelligence.
Getting with better data a precise price-climate risk
To develop adapted price strategies for real estate, the evaluation of data sets is essential. The insurance industry can thus induce private property owners and municipalities to set up joint initiatives, since valuable data helps insurers create a precise price-climate risk. For example, if it becomes very costly to live on the coast, this will encourage real estate buyers to purchase a house in another region. However, if a discount is offered for climate protection houses, homeowners will take this as an incentive and make an investment. For this, the data management must improve considerably, and location intelligence offers a kind of perfect solution.
Location intelligence enables price differentiation
Differential pricing is common in many other areas of insurance, for instance, when determining car insurance prices, several individual customer characteristics such as gender, age or accident history are considered. Insurers are increasingly using geographically refined data for price differentiation. Thus, among other things, different flood risks for coastal houses could be assessed or fire protection insurance in risk areas. Due to the high data quality, insurers can offer individual prices, such as personal self-protection for homeowners in risky residential areas.
The advantage of the insurer lies in the fact that the insured owner has fewer claims in the wake of a storm, as he has invested in premiums and risk insurance in advance. Insurers can also encourage the government to invest in climate protection, and catastrophe bonds are growing in popularity.
Risk Management Software
Risk management software is used for the precise assessment and evaluation of insurance discounts. So far, a combination of disaster modeling and modified bonds have already been tested by coastal communities and flood data and geographic data from affected cities were used to assess the effectiveness of potential flood protection. Such an analysis allows, for example, the construction of an optimally high sea wall to protect a city, or cities could in general use the software to determine which protective measures are the most cost-effective. That way, communities can implement better disaster preparedness and minimize the tax burden.
Just imagine the following scenario: there are two identical coastal communities, but one community has traditional insurance while the other includes an innovative insurance company. The latter community will be more resilient regarding looming natural disasters, and ultimately the insurance industry will play a key role in maintaining climate stability. Knowing how it works, which community would you choose?
By Daniela La Marca