Insurance Inspection Trends: Is 2020 the Year of the Catastrophe?

Insurance Inspection Trends: Is 2020 the Year of the Catastrophe?
Hurricanes, wildfires, floods and other natural disasters are on the rise, according to the National Oceanic and Atmospheric Administration. They’re becoming more frequent, more expensive and more complicated to prepare for–and the insurance inspection industry has taken notice.
Here’s a look at three ways the industry will respond in 2020:

1. Underwriters Are Taking a More Cautious Approach to Commercial Properties
The last year will be remembered for many things, from impeachment proceedings to a college admissions cheating scandal to another FIFA Women’s World Cup title for the U.S. women’s national soccer team.

But it’s the natural disasters that left an indelible mark on the insurance industry.

According to an article published by CNN Business, fires, storms and floods did more than $150 billion in damages in 2019–and the destruction doesn’t seem to be slowing down. CNBC reports that the average number of billion-dollar disasters has more than doubled in recent years, from just over six between 1980 and 2018 to 15 from 2016 to 2018.

In response, insurance underwriters are taking a more cautious approach to the way they deal with commercial properties. According to an article in the Insurance Journal, it’s resulting in higher rates, underwriting that is more strict and rising deductibles.

It’s also been good for insurance companies, especially if they have an insurance inspection partner who can help them minimize risk and prepare for future natural disasters, which can only be described as impending.

2. Insurance Companies are Doing More with Data
When a natural disaster strikes, it doesn’t just decimate the communities it strikes, it can take a toll on insurance companies, too–especially if there are discrepancies in the data they’ve used to determine premiums.

Back in 2018, Perr & Knight conducted a study that looked at how insurers can be adversely affected by data discrepancies.

It showed that in 5 to 10 percent of cases, inaccurate prices and premiums that were either under- or over-priced caused big problems for both insurance companies and customers. And the issue was compounded after natural disasters.

The takeaway for insurance companies is that it has never been more important–in light of the increasing frequency of large-scale natural disasters–to make sure every insurance inspection uses precise data to determine prices and premiums.

3. True Reflection of Risk is Complicating Capacity
With natural disasters increasing in frequency and severity, insurance companies are asking underwriters to be more prescriptive with the way they determine a property’s true reflection of risk.

As the Insurance Journal has pointed out, the result has been hard on property owners, particularly those in the commercial realm, who have seen 5 to 10 percent increases become the norm (and spikes as high as 50 percent).

That’s great for insurers–especially those who are willing to take on the risk.

But not everyone is willing to do that, and this has left property owners fighting to find partners. If you’re willing to take on the ever-increasing risk in areas where natural disasters are increasing, it could pay off.

But the key is to partner who can deliver an insurance inspection that provides precise data.

Are You Prepared to Protect Your Company from 2020 Catastrophes?
Will climate change be a bank or bust proposition for your company?

If you’re looking for a partner who can help answer that question, connect with Insurance Risk Services today. You’ll find seasoned professionals who can help protect you–and make the most of–catastrophes in 2020.

We’re delighted to announce that Insurance Risk Services will rebrand to Davies in the near future.

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