MainDB: An Ounce of Prevention - Linking the Interests of Homeowners, Businesses, and Insurance Providers

Title: An Ounce of Prevention - Linking the Interests of Homeowners, Businesses, and Insurance Providers
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NWPTypeOfOrganization: Private sector
NWPGeographicRegion: Europe; North America
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Adaptation element: Education and training; Financial support; Impact assessment; Science and research
Adaptation sector/theme: Coastal areas/zones; Disaster risk reduction; Infrastructure; Human settlements
Climate hazard: Extreme cold; Extreme heat; Floods; Tropical cyclones/typhoons
Country: United States of America
NWPDataSource: PSI
Description: The Travelers Companies, Inc. is one of the largest providers of personal and commercial property and casualty insurance products in the United States, with headquarters in St. Paul, Minnesota, and representatives in every U.S. state, Canada, Ireland, and the U.K.
 
Travelers has consistently focused on the impact of changing climatic conditions in order to provide insurance protection that both addresses customer needs and achieves internal financial objectives. However, following the severe 2004 and 2005 Atlantic hurricane seasons, the company determined that a more cohesive and integrated approach to climate risk was needed. Travelers formed a number of new internal working groups and expanded the roles of existing groups to address exposure and risk associated with climate change.
 
Travelers is engaged in initiatives designed to reduce exposures to extreme weather events for itself and its customers. These actions include providing information and price incentives for insured parties to help mitigate personal and commercial losses due to extreme weather events, reassessing its exposure to risk because of changes in climate, and modifying pricing strategies and policy terms and conditions to reflect updated assessments of current and future risks.
 
Specific actions that Travelers has taken to adapt to climate change include:
Reassessing coastal underwriting practices. The definition of coastal areas has been expanded to include counties farther inland than previously considered and contractual terms of coverage now include more sharing of responsibility for both households and businesses. In general, coastal customers now assume a greater share of risk than before, providing greater incentives for them to engage in loss control and adaptation activities.
Updating catastrophe modeling. Travelers and other insurance companies utilize current modeling techniques to help predict and manage potential catastrophic losses. Estimates of losses in severe weather scenarios are rising due to the anticipation of more frequent and severe hurricanes, growth in coastal development, and rising costs to repair damaged property after a severe event.
Offering “Risk Control” services. Travelers Risk Control Services Group provides assistance with a range of loss mitigation and adaptation techniques. These include monitoring building code standards and regulations in support of building resiliency, providing assistance in disaster preparedness planning, and delivering business continuity training.
Redesigning pricing. Pricing strategies for commercial and personal customers take into account differences such as building age, construction, and loss mitigation efforts, which affect likely losses during extreme weather events due to changes in building codes over time. Travelers continues to evaluate and enhance its products through the development of incentives to homeowners and commercial customers who install storm resistant building components such as shutters or fortified roofs that are better able to withstand severe weather events.
Engaging in community and government outreach. Travelers engages in industry and broad-based efforts to encourage disaster awareness and preparedness among homeowners and commercial customers. These efforts also focus on providing information to governmental organizations about the benefits of long-term loss mitigation strategies. These include the adoption and enforcement of more robust building codes, enhanced land-use planning, and hurricane preparedness.
Expected outcome: Travelers recognizes that climate risks are evolving and it is essential to good business to continuously monitor and investigate these risks in order to proactively and appropriately adapt its products and services strategies.
Further information: For further information go to: https://www.travelers.com/
Find the case study summary here: https://unfccc.int/files/adaptation/application/pdf/the_travelers_companies.pdf
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NWPPartner: The Travelers Companies, Inc.
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NWPOutcome: Travelers has also introduced pricing strategies to encourage environmentally responsible behavior. This includes providing discounts on car insurance for drivers of hybrid-electric automobiles and enhanced coverage for owners of “green” commercial buildings. These products are designed to respond to the evolving needs of customers and also recognize the potential “halo effect” in which adopters of climate-change mitigation technologies are viewed as low-risk customers. While there is not yet enough data for clear actuarial support, Travelers’ internal market data indicates that there is a correlation between risk-averse and environmentally responsible behaviors. Thus, those who purchase a hybrid-electric car are also likely to be safer drivers. Similarly, owners or builders of energy-efficient or “green” buildings may be more likely to detect and remedy risk-related issues, such as the overall integrity of the building or the safety and maintenance of equipment and systems. Green buildings are also typically newer and less prone to the risks presented by older buildings.

 


 
Underlining all of Travelers’ actions on climate change is the notion that an ounce of prevention is worth a pound of cure. The company would much rather help its customers be prepared for events, thereby minimizing or avoiding potential losses, than have them suffer the monetary and non-monetary impact of a severe loss. Travelers recognizes that climate risks are evolving and the company is continuing to monitor and investigate these risks in order to proactively and appropriately adapt its products and services strategies to help its customers.
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NWPReferences: Adapting to Climate Change: A Business Approach (Pew Center on Global Climate Change): http://www.pewtrusts.org/en/research-and-analysis/reports/2008/04/16/adapting-to-climate-change-a-business-approach
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Created at 21/04/2016 11:45 by Roberto Felix
Last modified at 16/05/2022 16:10 by Nicholas Hamp-Adams
 
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