WIN Magazine - Spring 2015 - (Page 16)
BY RALPH SABBAGH ASLI
DRON E S
GOING to make us
run for our lives?
Are we going to
face another polar
vortex? Are tornadoes and hailstorms going to continue wreaking havoc at the same
pace as previous years? Will homes
and commercial buildings become
more intelligent than we are? Will
green construction technology help
us save energy or is it more trouble
than it's worth? Are vacant buildings good risks or a menace to the
property insurance industry?
These are some of the issues that
are definitely impacting the property insurance market as we move
out of recession and into a growth
phase. In this article, I'll assess
how these issues will challenge the
property insurance market over the
Drones are featured in more and
more headline articles, from stories
about accidents caused by dronechallenged operators to revelations
of personal privacy invasions. On the
one hand, people are afraid of drones.
This was confirmed in a recent Chubb
survey1 that found that 73 percent
of respondents were worried that a
drone would crash into their house
and cause major damage. A total of
55 percent were worried that a drone
would cause personal physical damage by landing in a heavily populated
area. Finally, 34 percent were worried that drones would eventually
be able to steal things. On the other
hand, the survey showed that people
want drones-a growing number of
individuals think they should be
legal to use.
For the property insurance industry, drones represent a challenge-
especially if more people start flying
them around randomly. While we'll
certainly see an increase in dronerelated accidents and crashes, the
industry should be able to easily
absorb the resulting damage costs.
Drones have a good side too.
They're used to monitor public safety
and in agriculture, and they play
an increasing role in environmental and disaster damage evaluation.2
An appealing trend for the property
insurance industry is on the claimadjusting side. Adjusters are increasingly able to deploy drones after
catastrophes to evaluate the damage
within hours of the incident. After a
hurricane, for example, an aerial survey can quickly reveal extent of the
damage. Drones can also reveal roof
damage after a hailstorm. On the
underwriting side, better reconnaissance is leading to more complete
and accurate site surveys. Inspectors
can observe the condition of roofs
and other difficult-to-access areas
more safely and quickly.
The bottom line is that there a lot
of uses for drones in the property
insurance industry, and with proper
regulation and safety, they'll become
an increasingly useful tool.
CLIMATE CHANGE AND
Weather events continue to impact
the property insurance marketplace.
A report issued by the Insurance
Information Institute3 showed that
in the first half of 2014, property
and casualty profits increased to $26
billion, up by 6.4 percent over the
same period a year earlier. But those
results would have been even stronger if it weren't for damage costs
16 | v i e w t h i s i s s u e a t | www.aamgawin.org
caused by extreme cold and winter
storms in early 2014.
The year 2014 will go down in
history as one of the five costliest
years on record in terms of winter
damage claims. Those of us living
in the northeast definitely felt the
impact. But not only were winter
and spring storms costly; moving
into fall, hailstorms and tornadoes
in the Midwest and Texas continued
to pressure the industry.
According to ISO's PCS unit, total
insured catastrophe losses through
June 20, 2014, were up by 24 percent
to $12.4 billion-over the same period
in 2013 (which was a quiet Atlantic
hurricane year but still generated
insured losses from thunderstorms
and tornado events).
Other data shows that average U.S.
thunderstorm losses have increased
sevenfold since 1980,4 while average
annual winter storm losses have
almost doubled since the early 1980s.
"Polar vortex" is now part of our
vocabulary, as is "convective storm."
No one can predict the weather.
In the property insurance industry,
we experience both frequency and
severity trend issues. We're seeing
an increase in weather-event frequency that is resulting in more
weather-related losses. The severity
issue stems mostly from population
growth in areas with a history of
severe catastrophic losses (including Florida, the Midwest, Tornado
Alley and the Northeast). Even a relatively small storm such as Hurricane
Sandy in 2012 can result in heavy
The industry will have to continue
to watch the weather very closely.
Unless there's a change in weather
patterns or population distribution,
tough decisions lie ahead-decisions
Table of Contents for the Digital Edition of WIN Magazine - Spring 2015
Cover Story: Will the Excess and Surplus Lines Insurance Business Saddle Up with Standards? By CJ Ketterer
Digital Maturity—or Extinction: Your Survival Now Depends on Digital Transformation By Scott Klososky and Corey White
Emerging Trends: The Technology Side By Greg Ricker, CPCU
Emerging Trends in the Property Insurance Market By Ralph Sabbagh, ASLI
Underwriting the Exposures of Business Operations: The Impact of Tenant Leases By Craig A. Mathre, CPCU, CLU, CIC, CRM, ASLI, RPLU, AU, AIC, ARM, AAM
Emerging Risks: Brain Research By Dr. Achim Regenauer
Millennials: How Well You Attract and Keep Them Could Be Your Competitive Advantage By Teresa Vaughn, SPHR
Volcanoes, Hurricanes, Tropical Storms and Floods: Perils and Exposures in Paradise By Sharon K. Lee
“Empowering the Wholesale Nation”: AAMGA Annual Meeting Registration and Room Block Are Now Open
Index of Advertisers
WIN Magazine - Spring 2015