Climate Change is Real
Unusually long and active hurricane seasons. Wildfires burning out of control. Melting glaciers that lead to rising tide levels and floods. Sure, storms, fires, and floods will happen in any year, but in recent years, there have been more of these and other types of disasters linked to climate change.
And the problem hasn’t been solved; it’s ongoing and costs everyone money. One regulator even suggested that the financial risks of climate change could be comparable with the 2008 global financial crisis. So, what does climate change in 2021 mean for your insurance agency?
It’s Time for Innovation
When property owners experience losses, they turn to their insurers to absorb the cost and lessen the impact. But as climate change marches on and unusual disaster events become usual, insurers may not be able to withstand the cost of that impact, and neither will the consumers of insurance products. This may mean that it’s time to start coming up with new products to help consumers survive losses without bankrupting your agency.
Climate change-related insurance products can help by providing insurance companies with new income streams that can be used to cover losses and keep agencies operating while providing consumers low-cost methods to continue to protect themselves. Examples of climate change-related insurance innovations already exist in other countries. Look for these and newer ideas to be considered and even adopted in the coming year.
Educate and Incentivize Consumers
Another tactic that insurers will likely need to take involves educating their consumers about the potential risks of climate change and how to protect themselves and their property. While insurance industry experts need to be informed about the pitfalls and likelihood of climate change, their clients may not be so well-informed. But most property owners are familiar with insurance companies and view them as a trusted source of information.
For example, a homeowner may not be an expert on roof protection, but they know that failing to properly protect and maintain their roof may render them ineligible for compensation from their insurer in the event of a disaster. Therefore, they’re likely to check with their insurer and follow their directions in regard to roof care.
So, when an insurer knows that a client’s property is endangered because of climate change, it can help to provide that client with education about how best to protect their property. It can also insist that homeowners take certain steps in order to keep their policy valid or incentivize extra protection in the form of discounts. For instance, clients who maintain a firebreak on their properties may be eligible for a discount. Let them know.
The Bottom Line
Climate change is here to stay, and agencies can’t solve that problem on their own. But by looking for innovative solutions and educating their clients, they can contribute to the solution and further protect their clients and themselves.
Many insurers are thinking about the future of their own agencies and the insurance industry in general. To find out more about how agencies can benefit from an organization like the American Agents Alliance, contact us.