How Climate Change Is Transforming the Home Insurance Industry

Thu Sep 09 2021

flood waters covering half a home

The homeowners insurance industry is built on risk models that help companies decide which homes to insure and which ones to walk away from. Forecasting how much they might pay in claims allows insurers to cover those costs. The more accurate an insurance company’s predictions are, the more likely it is for the company to be profitable.

Unfortunately, climate-related risks, such as rising seas, more frequent and powerful hurricanes, and worsening droughts, have made the old forecasting models nearly obsolete. And when insurance companies aren’t sure what the risks are, they take steps to protect themselves. This often means leaving areas most exposed to climate-related risks.

Kin is different because we're built to tackle the climate crisis head on. How? By integrating weather modeling into our tech infrastructure, we get ultra-granular exposure measurement that enables us to serve high-exposure markets.

In non-insurance speak? We look at a lot more (and a lot better) data so homeowners in places like California, Florida, and Louisiana pay less for essential coverage.

Why Traditional Insurance Companies Aren’t Ready for Climate Change

Legacy insurance companies are built on outdated and inflexible technology. This makes it difficult – even impossible – for them to respond quickly to new information and external changes. Most also rely on just a few details to figure out how risky a home is to insure, and much of the information they get comes directly from the person applying for coverage. Those answers for some key questions are often guesses at best.

But perhaps the biggest problem for traditional insurance providers is that they think they can outrun climate change. Put simply, climate change is a global problem, and there won't be anywhere to run in 10 years. Still, legacy insurers are responding by tightening their underwriting guidelines, and the few consumers who fit those guidelines may find themselves priced out of coverage.

The data insurers need to improve their ability to insure homes in high-risk areas is available. And it's time to adapt.

The Impact of Climate Change on Florida Homeowners Insurance

Right now, it's hard to find affordable Florida homeowners insurance. Insurance companies have been paying out large claim settlements for catastrophic storms for years, but climate change has upped the price tag, causing insurers to either raise premiums or opt out of the Sunshine State altogether. In fact, insurance companies in Florida recently dropped 50,000 policyholders.

Just because you already have insurance doesn't make you safe from losing it. An insurance company can choose not to renew coverage when your policy expires. This is called a non-renewal, and insurance companies sometimes use it to get risky homes off of their books. With more homes exposed to natural disasters because of climate change, more insurance providers are non-renewing homeowners policies to better protect their bottom line.

How Does Kin Insurance Respond to Climate Change?

While it's true every home will likely be impacted by climate change, that doesn't mean every home will be impacted the same way. Everything from the building materials to the foundation type to the terrain it's built on can impact a home's ability to survive major damage.

That’s why we retrieve reliable data from a variety of sources, including the government, satellite images, and real estate archives. Once we’ve collected this data, we use advanced technology to analyze it thoroughly. This allows us to get more accurate readings of how much money a home should be paying for insurance – even in regions that are repeatedly bombarded by hostile weather. The end result is affordable home insurance for more people.

Customer Care During Disasters & Claims

Claims can be particularly tricky for legacy insurance companies because of the influx of losses during a catastrophic event. Overloaded, already slow systems mean long wait times for customers to even file claims. Long processing times often leave customers wondering if they’ll ever see their damaged homes repaired.

Our solution is to create systems that interact with customers directly during a crisis. First, we text customers who are in harm’s way with resources to help them prepare. Then we send a post-storm text to find out if they’re safe and to get information we need if they’ve suffered any damage, including pictures that can help us get a claim started for them.

What the Climate Emergency Means for the Insurance Industry

Like the recent climate report from the Intergovernmental Panel on Climate Change (IPCC) says, the climate emergency is here and it’s already impacting our lives. As climate change intensifies, it will continue to impact home insurance. Premiums will likely keep rising and quality coverage will be harder to get.

However, that’s only true if insurance companies can’t adjust to changing times. At Kin, we know better data and direct-to-consumer distribution are key to handling the new normals that climate change brings. We’re not only better able to assess risk, but we can also help our customers best mitigate it.

Video Transcription

[Sean Harper speaking] As the world warms, the weather is getting much more extreme. Last year (2020) we got hit by five hurricanes in the United States. That's more than we've ever been hit by before. The last four years have been historic wildfire years in all of the American West. So legacy insurance companies crave stability, and they have a hard time responding when anything changes. And so what you see happen is in places where the weather becomes more extreme, more variable, the big insurance companies that you know of, they often just pull out, which leaves people who live in those areas with a really big problem which is they can't get insurance. They can't get good insurance. At Kin, we've built an insurance company that can respond really fast to change. We can do that because we're high tech and because we're using a lot of data that's never been used in the industry before. That allows us to provide insurance in places where other companies can’t, which is really important because you can't actually live there unless you're able to get insurance.


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