Extreme Weather Gives Insurers Cause To Look At Role Of Technology For Catastrophe Response

It's an ill wind that blows nobody any good, as the adage goes, and weather sufficiently foul to damage property is an opportunity for Insurance & Technology's reporters to take a look - always with sensitivity toward the victims of these events - at the role of technology for catastrophe response, risk selection and geographic exposure management. In this regard, the winter of 2007/2008 has been an embarrassment of riches, if the reader will excuse such a perverse use of the phrase.We've seen a repeat of last year's Pacific Northwest "storm of the decade," and numerous snow and ice storms and other weather related events involving landslides, floods and other hazardous conditions. Waves of snow deposits have brought special dangers. According to a report on Northwest Cable News, 13 people have died in avalanches already this winter, eight of them in Washington State. In the last week of December a highly experienced snowboarder jumped beyond the safety zone and landed headfirst into the deep snow of a tree well. It took bystanders 15 minutes to free him, by which point he had suffocated.

On the one hand it's heartening to see the latest press release from Farmers, et al., showing that the CAT team is on the job; on the other hand, its distressing to see so many events that require their services. The primary concern is for the people harmed by these events, but the greater frequency of these occurrences also raises questions about insurers' ability to predict them and to vary the price of risk accordingly.

Insurers have made significant progress with the use of GIS (geographic information systems) technology, and also in the analysis of claims data to refine rating and underwriting. But it is in the nature of these tools that they can be used in increasingly refined ways as insurers get more comfortable with them and incorporate more and more experience into the way they are applied.

There are limits, of course - insurers will never be able to anticipate every possible landslide or avalanche. However, there is room for optimism about how well insurers can leverage technology to build a much more refined risk picture, according to Pat Saporito of Business Objects. "The available tools bode well for better protection of policyholders' assets and a better understanding of exposures and their impact, on the part of insurers," Pat remarked to me during a phone chat yesterday.

As insurers continue to build their geographic risk expertise they may even be in the position to provide novel services, according to Ms. Saporito. "Exposure analysis could be a value-added service provided by a carrier's agent, perhaps even part of the real estate process when the customer is looking to buy a home," Pat speculates.Insurers have made significant progress with the use of GIS technology, and also in the analysis of claims data to refine rating and underwriting. But it is in the nature of these tools that they can be used in increasingly refined ways as insurers get more comfortable with them and incorporate more and more experience into the way they are applied.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio