The Risks of Hazard

Every year, AM Best publishes Understanding the Insurance Industry, and the 2015 edition came out a week or so ago. It’s subscription only, but here’s the link.

Inside is the Property/Casualty Market at a Glance, and it’s worth a glance because they call out so many topics we cover at Risks of Hazard. After the summary of what the segment is, and some cool "Top 10" lists (State Farm and Berkshire Hathaway dominate them), the editors state that “the property/casualty industry faces several issues.” That’s where it gets interesting.

First up is Personal Lines, and how “the segment and the industry as a whole continue to allocate significant resources toward improving technological systems.” Indeed, indeed, and indeed! AM Best goes on: “Companies continue to move away from legacy systems and invest in technology to improve and streamline all aspects of the insurance process.” The move towards these technologies is "being undertaken by companies of all sizes in an attempt to reduce long-term expenses and gain or maintain a competitive advantage.”

With 2015 now firmly in the past, I am seeing a lot of blogs with 2015 Top 5 lists. As with all good ideas, it needs to be copied assimilated. Today, I am counting down the Top 5 articles from last year based on viewership.

Without any ado at all, here are the Top 5 Risks of Hazard episodes from 2015:

5. Is Disruption Really Coming to Insurance? In October I attended a conference in San Francisco exploring how insurance was about to be disrupted. I wrote this post afterwards, being unconvinced. Meanwhile, a nice debate about it has popped up at ITL, here and here.

First off, Happy New Year to everyone with an interest in nat cat analytics for insurance.

To kick off 2016, The Risks of Hazard would like to address the biggest single problem faced by the insurance industry as a whole. Is it the coverage gap? Is it inaccurate data or analytics? Is it the need to transition to the cloud? Nope – those are minor by comparison.

According to the U.S. News Millennial Report 2014 (cheers to The Actuary for reporting it), 22% of the largest demographic likely to buy insurance in the coming decade claim to somewhat understand insurance. Yes – 78% of people in their 20s and early 30s don’t even somewhat understand insurance. Yikes.

Last week BuzzFeed ran a piece on the New Madrid Seismic Zone, a sometimes-forgotten and sometimes-remembered seismic zone in the middle of the United States that could potentially cause over $100B in damage. We took a look at New Madrid earlier this year (though at that time, I couldn’t pronounce New MAD-rid properly), specifically at how only 20% of the homes in the exposed region are insured for quake based on work by Swiss Re.

The BuzzFeed article, The Day the Earth Stood Still by Thomas Gounley, looks at a day 25 years ago this month when the big earthquake was predicted to hit the area. The article is not about geology or seismology, per se, but rather how a certain Iben Browning predicted (with 50% certainty!) that an earthquake would hit New Madrid on December 3, 1990. Needless to say, nothing happened. The article describes the media circus and shows the fun people had on their marquee signs, as well as taking a look at the underlying science of the fault zone.

Imagine for a moment that your home has been damaged, and you and your family need to move out for a few months while it’s repaired. The more you think of it, the more the extra expenses add up – rent, extra groceries because you have a smaller fridge, extra commuting costs, and on and on. Luckily there is insurance for this: loss of use.