WIN Magazine - Spring 2015 - (Page 16)

FEATURE EMERGING TRENDS IN THE PROPERTY INSURANCE MARKET A BY RALPH SABBAGH ASLI RE 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 coming years. DRONES 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 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 insured damages. 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 http://www.aamgawin.org

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

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