Last week (March 4-6) the National
Earthquake Conference — attended by
hundreds of experts, including
academics, engineers, government leaders, insurance professionals, and
scientists – took place in San Diego.
The day after the conference, as if to make a point, a 5.5.
magnitude earthquake that
struck Baja California, Mexico, shook San Diego.
While no damage was reported, a study released
at the conference by the San Diego chapter of the Earthquake Engineering Research
Institute showed that a magnitude 6.9 earthquake on San Diego’s Rose Canyon
Fault could damage 100,000 residences, cause widespread road and bridge
failures, and make parts of Mission Bay sink about a foot. Such a quake would
inflict an estimated $38 billion in building and infrastructure damage,
displacing 36,000 households and wreaking havoc on San Diego’s $245 billion
economy.
Don’t be scared, be prepared
Conference goals were to improve life safety when earthquakes
occur, to help communities learn how to recover faster, and to help prevent or
minimize physical earthquake damage through stronger building practices,
including research-informed, model building codes and standards.
Janet Ruiz, Triple-I’s Director of Strategic
Communications, who was one of the attendees, said one of the great points of
the conference was: “Don’t be scared, be prepared.”
Earthquake risk is insurable
One of the ways to be prepared for any disaster is to make sure you have adequate insurance. But as few as 13 percent of California homeowners have earthquake insurance.
Glenn Pomeroy of the California Earthquake Authority said earthquake risk is insurable. The average annual cost of earthquake insurance for a typical home in San Diego is between $100 and $444. Renters can secure financial protection from CEA for as little as $35 per month.
The devastating storms that ripped through central Tennessee on March
3 remind us that tornadoes continue to be one of the most destructive and
costly natural disasters.
Tornadoes are more common in the central United States, though they can occur almost anywhere in North America, including in large cities. They can happen at any time of year or at any time of the day or night, though they occur most frequently between early spring and July.
Below are some of the basic precautions to take before, during and after a tornado.
Before
The Red Cross recommends
the following precautions:
Identify a safe place in your home
where household members and pets will gather during a tornado: a basement,
storm cellar or an interior room on the lowest floor with no windows.
In a high-rise building, pick a
hallway in the center of the building. You may not have enough time to go to
the lowest floor.
In a mobile home, choose a safe
place in a nearby sturdy building. If your mobile home park has a designated
shelter, make it your safe place. No mobile home, however configured, is
safe in a tornado.
During
When
a tornado warning sounds or a tornado has been sighted, do not try to outrun
it. Stay calm but quickly seek shelter in the safest place possible.
If you are at
home, the safest
place to be is underground. Basements are usually the most protected area, but
if this is not an option take cover in central part of the house away from
windows—for example in a bathroom, closet, interior hallway or under a heavy
piece of furniture.
If you are in an
office building or skyscraper, go
directly to an enclosed, windowless area in the center of the building—away from
glass and on the lowest floor possible—and crouch down and cover your head.
Interior stairwells are usually good places to take shelter and, if they are
not crowded, allow you to get to a lower level quickly. Stay off elevators, you
could get trapped if the power is lost. If you are in a tall building, you may
not have enough time to evacuate to the lowest floor.
If you are at
school, follow the
staff instructions and go to an interior hall or room in an orderly way as
directed. Crouch low, head down, and protect the back of your head with your
arms. Stay away from windows and large open rooms like gyms and auditoriums.
If you are in a
car or truck, abandon the
vehicle and seek shelter in sturdy structure. If you are in open country, seek
shelter in the nearest ditch. Lie flat, face down on low ground, protecting the
back of your head with your arms. Get as far away from trees and cars as you
can.
If you are in
a mobile home, get
out! Even if the home is tied down, you are probably safer outside.
After
Damage caused by tornadoes is covered under standard
homeowners and business insurance policies, as well as the optional
comprehensive portion of an auto insurance policy.
If you sustain tornado damage:
Contact your insurer as soon as
possible and start the claims filing process. After tornadoes and other
disasters, insurance companies will reach out to those with the worst losses
first.
Take photos of any damage. A
photographic record is useful when making insurance claims.
Make temporary repairs to prevent
further loss from rain, wind or looting; these costs are reimbursable under
most policies, so save the receipts.
Make a detailed list of all
damaged or destroyed personal property. If you have a home inventory, it will
be extremely useful here. Don’t throw out damaged property until you have met
with an adjuster.
Don’t rush to sign repair
contracts. Do your homework, deal with reputable contractors and get
references. Be sure of payment terms and consult your insurance adjuster before
you sign any contracts.
If your home is uninhabitable
because of tornado damage, your homeowners or renters insurance provides
coverage for additional living expenses (ALE), such as hotel bills or meals
out. Save all related receipts and, if you have vacated your home premises,
make sure your insurance representative knows where and how to contact you.
Talk to your insurance
professional if you have any questions about any part of your insurance
coverage.
More on how to file a claim following a disaster here
Facts & statistics on tornadoes and thunderstorms here
COVID-19, the new coronavirus, has killed more than three
times as many people as the 2003 SARS epidemic.
The World Health Organization (WHO) reported that, as of 10
a.m. Central European Time (CET) on March 1, there were 87,137 confirmed
COVID-19 cases and 2,977 of the infected people had died. From November 2002
through July 2003, according to the U.S. Centers for Disease Control and
Prevention (CDC), 8,098 people worldwide became sick with severe acute
respiratory syndrome (SARS) and 774 died.
More people are believed to have been infected with COVID-19
than official statistics show. This is because confirmed infections are based
on positive tests for the virus, and some countries—including the United
States—have been doing very little testing. Further, the estimated 2 percent
death rate attributed to the disease is based on this unreliable infection
count.
Instead of SARS, some are now comparing COVID-19 with the Ebola pandemic of
2014 to 2016. Ebola is believed to have
killed about 50 percent of those it infected, but that outbreak was contained
before it reached the same number of infections as COVID-19.
So, is there a useful historic comparison
to be made with COVID-19? I would argue that there is: the “Spanish Flu” of
1918-19.
Policemen in Seattle during the influenza epidemic. December 1918. National Archives.
There is no vaccine for COVID-19, and
experts suggest it could take a year or
more to develop, test, manufacture, and distribute a vaccine. This suggests
there are few medical strategies for dealing with the current outbreak. It’s as
though we’re medically in the world of 100 years ago.
The 1918 flu virus had an estimated
mortality rate of about 2 percent and was very infectious. It is estimated that
as many as one-third of the entire world population was infected at some time,
so even a 2 percent mortality rate caused millions of deaths.
This raises a scary thought about how
the COVID-19 pandemic might play out: the Spanish Flu swept around the globe in
three phases. The first was in the
Spring of 1918 and, although it infected widely, had a relatively low mortality
rate. The second phase occurred in the Fall of 1918. This phase saw faster
infection spread and was much more deadly. The third phase was in February and
March of 1919 and was less infectious and less deadly than either of the two
prior phases.
World War I – with large concentrations
of soldiers in barracks and trenches and truck convoys moving across Europe –
may have contributed to this infectious arc. But the virus killed more people
than the war on every continent except Europe.
Insurance
industry impact
What would a COVID-19 pandemic mean
for insurers? The main impact would likely be on health insurers, since the
number of people seeking hospitalization would likely spike claims far beyond
anything their rate structures have anticipated. In 1918 hospitals were so overwhelmed
that auditoriums, indoor sports arenas, and similar spaces were set up to house
patients. Scarcity rates would apply; for example, the number of respirators
available currently is far short of what would be needed, and prices for new
supply would likely surge.
As I’ve written previously, for life insurers the effect of a severe pandemic would depend on
which segments of the population are likely to die. In 1918, in addition to the
very old, that virus struck unusually strongly at people in the prime working
years, triggering benefits from both individual and group life insurance. The
sudden impact of such unpredicted losses would affect all life insurers,
particularly the weaker ones.
In the property and casualty sector, the
line most directly affected is likely to be workers compensation, particularly
for health care workers and others exposed to the virus as a result of their
work—such as police, fire, and EMT. Another possible line affected is various
liability lines, involving claims from people who became sick from
manufacturing, dispensing, or receiving a vaccine or other treatments. In
recent years, Congress passed laws blocking such liability claims, but it’s not
clear that it will do so again today.
Beyond the direct effects to
insurance, there are growing forecasts that the global economy, and especially
particular sectors, could see dramatic cutbacks. Businesses and other
organizations that involve people gathering in crowds are already seeing such
effects, and insurance premiums that reflect these downturns are likely to
follow. However, claims are also likely to turn down (e.g., fewer auto
accidents), so the effect on those lines might actually be neutral or positive.
Learn from history
Today people and goods move around the
world with unprecedented speed. Urban environments and the transit systems that
serve them are as packed with people as any military convoy or trench network.
If COVID-19 follows a similar track to
that of the Spanish Flu, the current outbreak would turn out to have been a
mild phase. If this scenario is correct, the first phase would taper off in a
month or two, followed by several months in which the virus would appear to
have ended its threat.
We should continue developing vaccines
and other preventive/mitigating measures during this lull to better prepare for
the more virulent phase that might manifest in the second half of 2020. Failure
to do so would mean we’ve learned nothing from the worst global pandemic in the
last 100 years.
In this video, Sean Kevelighan, CEO of the Insurance Information Institute (Triple-I), talks about the Triple-I’s Resilience Hub that the organization began developing in 2019 in partnership with Aon and the Colorado State University Department of Atmospheric Science.
The Hub’s goal is to use data in a way that helps people visualize and understand the risk of natural catastrophes with which they are living as catastrophes become more severe and more people move into high-risk areas.
“We’re tracking hurricane paths all the way back to 1990 so that when we forecast with those relative years, people can better understand what the impact might be in today’s economy,” said Kevelighan.
The project also tracks public flood insurance take-up rates through the National Flood Insurance Program. The average take-up rate for flood insurance is only 12 percent for the nation.
The Hub is part of the Triple-I’s overall insurance for resilience project, which aims to build a coalition that includes government agencies such as FEMA, private sector stakeholders such as Aon, and academic institutions such as the Wharton Risk Center to maximize impact. The Hub’s goal is to provide in one location easy-to-use content to empower consumers to make data-driven decisions when it comes to managing their exposure to extreme weather events. “What we want to drive in the long run is behavioral change. We want people to think twice about where they are living and how they’re living so that they can be more resilient.”
By Max Dorfman, Research Writer, Insurance Information Institute
A new report by Zurich North America, in collaboration with DuPont and the nonprofit Institute for Social and Environmental Transition (ISET-International), examines the ever-increasing risk of wildfires in California. Based on a study utilizing Zurich’s Post-Event Review Capability methodology, “California fires: Building resilience from the ashes” draws from research and interviews with those affected by the fires in addition to civic and nonprofit representatives involved in risk reduction, response and recovery. The report seeks answers to why these fires have become so hazardous, and the ways in which communities can become more resilient.
The Deadliest Fires Yet
Fires are becoming more frequent in California, with an increasing number of people living closer to affected areas. The state suffered the largest and most destructive wildfires in state history in 2017 and 2018. The 2018 Camp Fire alone claimed the lives of 86 people and devastated the town of Paradise.
With this danger in the “wildland-urban interface”—essentially where hazardous wildlands meet homes and businesses—residents and business owners need to understand their risk. Education is essential to protect these areas. “Education is one of the first steps to help residents take necessary precautions against wildfires,” said Marcel Milani, Global Strategy Leader, Resilient Construction, DuPont. “Once business and homeowners understand what’s at risk, and that they are in control of building site retrofits that could save their property and their lives, they will invest in change.”
California is Taking Steps to Limit the Next Big Fire
California has developed Fire Hazard Severity Zone Maps to demonstrate the areas that have the greatest probability and intensity of potential wildfires. These maps help show which homes need to meet Chapter 7A of the California Building Code, which requires homes be built to certain fire-safe standards. Paradise which has experienced multiple fires since 2008, provides an important example of why this is so significant. Homes built in compliance with Chapter 7A codes tended to fare better than those built before 2008, when the codes were put in place. Of the 350 homes built to the Chapter 7A code in Paradise, 51 percent survived compared to 18 percent of the 12,100 homes built before 2008.
However, in some cases, the rising cost of homes and increasing population leads to communities that, according to the report, are “disproportionately of lower socioeconomic status, elderly or otherwise more vulnerable.” The costs of fire-resistant structures mean fire-resistant homes likely need to be built alongside retrofitted buildings. Indeed, the report found that perceived cost was one reason 7A codes were not adopted. And for vulnerable populations, there needs to be help. “Reducing the costs of retrofitting homes and buildings to fire-resistant standards would be a step in the right direction,” said Karen MacClune, Ph.D., Executive Director for ISET-International. “Providing funding or low-cost loans for the most vulnerable would support them to take action.”
Pushing the Conversation Forward
Despite California instituting new building codes and statewide fire hazard mapping, the study recommends that further practices need to be undertaken. Other key takeaways from the report include:
There needs to be more data on benefits and costs of mitigation that could in turn help set priorities
There continues to be development in high-risk areas, further amplifying the risk and danger of these fires
Many Californians impacted by fire are slow to take actions to reduce their risk
There needs to be more preparation for a fire’s aftermath
Mechanisms are required to ensure adequate insurance
All of this leads back to the core concept of resilience.
“With resilience, it’s about minimizing impact, avoiding impact or shortening impact. Our job as an insurance provider is to make someone whole after an event,” said Ben Harper, Head of Corporate Sustainability at Zurich North America. “Proper resiliency planning differs based on the customer and the region, among other variables. But it shares a common thread: action before an event.”
Extreme Weather panel (L to R): Charles Chamness, National Association of Mutual Insurance Companies; Francis Bouchard, Zurich Insurance Group; Stephen Clarke, ISO; Dr. Daniel Kaniewski, FEMA; Dr. Rick Knabb, The Weather Channel; Kenneth Tolson, Crawford & Company
It was like music to my ears to hear risk and resilience experts at Triple-I’s Joint Industry Forum, in a panel on extreme weather, talk so much about communication.
Moderator Charles Chamness, president and chief executive officer of the National Association of Mutual Insurance Companies (NAMIC), kicked off the session by asking Dr. Rick Knabb – on-air hurricane expert for the Weather Channel (TWC) – about the impact on disaster preparedness of tools like TWC’s “storm surge depth simulator,” which Chamness described as “somewhat terrifying.”
If you haven’t seen it, the simulator uses virtual reality technology to show viewers what different water depths could look like and the kind of damage they could generate (see video below).
“We’ve gotten a lot of feedback,” Knabb replied. “Some people tell us, `Wow, I didn’t know how bad water can be.’ Some people tell us ‘You’re scaring me.’ And on some level, we’re trying to scare people just enough to respond and to prepare.”
Knabb added that he had no data to prove people who watch such simulations take immediate steps to improve their preparedness, “but we’re seeing the conversation change. Social media is one of the best ways I have to see that happening.”
The challenge remains, he said, to overcome “the positive bias” of people saying, “That looks really scary – but I don’t think it will ever happen to me.”
Francis Bouchard, Zurich’s group head of public affairs and sustainability, took the insurance industry to task for talking about risks in language customers don’t necessarily understand.
“We’re all risk elites here,” Bouchard said. “Our vernacular is not what normal people speak. And yet we insist on using our language to describe something that’s totally alien to most of the public.”
FEMA Deputy Administrator for Resilience Dan Kaniewski agreed.
“At FEMA, we no longer speak in these technical terms like `a one in 100-year event’” – a phrase, he said, that “makes a homeowner who’s just purchase their home think they have 99 years before they have to worry.”
Prepare, Mitigate, Insure
“When we at FEMA talk about ‘resilience,’” Kaniewski said, “what do we mean? We mean preparedness. We mean mitigation. We mean insurance.”
Kaniewski cited evidence from FEMA’s annual household surveys indicating that people in disaster-prone states are “more risk aware and better prepared” than elsewhere in the nation.
“But it’s not enough,” he said. “They have to do so much more.”
Beyond physical preparedness, Kaniewski said, “we have to talk to people about being financially prepared. That means having cash on hand. That also means insurance. Insurance is the best resilience tool.”
“Demand flood insurance”
Knabb agreed, calling upon meteorologists around the world to “talk about insurance more.” He also called on insurance agents to discuss flood coverage for their customers who aren’t in flood zones.
“If it can rain where you live,” he said, “it can flood where you live.”
He recounted buying a new home, asking his agent about flood insurance, and being told, “You don’t need it.”
“I told him, ‘Get it for me anyway,’” Knabb said. “And I’ve changed the graphics I use on The Weather Channel – instead of saying, ‘Ask Your Agent If You Need Flood Insurance’ to ‘Demand Flood Insurance.’”
The panel discussion covered a range of topics, including insurers’ need to emphasize risk reduction and resilience and the “data fluency” of insurance regulators. You can watch the session below.
The U.S. Federal Emergency Management Agency (FEMA) is being pressed to adopt innovative methods to increase insurance penetration for floods and other natural disasters. In a draft report, FEMA’s National Advisory Council suggests that in order to increase financial preparedness for householders and local governments, novel financial models must be considered. The report notably mentions parametric triggers as a way to grow the insurance markets and protect against future disasters. Blockchain is also recommended as a means to create a land and property registry stored off-site in a secure platform.
What are parametric triggers, and how can they help?
Parametric insurance is a type of insurance that agrees—before the triggering event—to make a certain payment, instead of compensating for the pure loss. Parametric insurance pays out immediately when a certain threshold, such as water depth or wind speed, is reached; thus, expediting funding and reducing overall administrative costs.
What does the future hold for this new model?
“When added to the ubiquitous nature of smartphones and other levels of connectivity, the opportunity for expanding parametric insurance protection to individual households may merely be a matter of connecting the dots, for which FEMA is uniquely placed to lead this effort,” the Council’s report states.
Indeed, the Council believes that FEMA should “look towards a new model of insurance” in an age when natural disasters increasingly threaten both public and private interests.
The draft report also includes many suggestions to improve disaster preparedness, such as better building codes and code compliance, better preparedness for Indian tribes and rural communities, building resilient infrastructure and increasing funding for mitigation.
To close the insurance gap the report recommends:
Educating the public about the benefits of flood renter’s insurance and hidden hazards in real estate, rental properties and communities.
Stress testing state insurance guaranty funds to determine if they can withstand large-scale disasters and insurer insolvencies.
Creating more offerings for state and local governments to reduce rates of self-insurance of infrastructure.
Financial information such as bank, savings and retirement account numbers and recent tax returns
Home inventory
Unfortunately, though, if you are told to evacuate it will be too late to search the house for all this stuff. When authorities tell you to leave you must leave immediately. The fire could be on you in moments.
By Brent Carris, Research Assistant, Insurance Information Institute
Left to right: Brett Lingle, Zoë Linder-Baptie, James Ballot and Brent Carris
The Wharton Risk Center and the Insurance Information Institute co-sponsored the second annual Hack-for-Resilience at PennApps XX, the nation’s oldest and largest student-run college hackathon. Presentations were given by Carolyn Kousky and Brett Lingle of the Wharton Risk Center School; and the I.I.I.’s James Ballot.
From September 6 – 8, 18 student teams used software and hardware technologies to “hack”—conceive and build new apps and devices—ways to combat the risks posed by natural disasters, such as hurricanes, wildfires, and floods. The students also vied to create either a product or service that provided insurance in a customer-friendly manner, a category generally known as Insurtech.
A panel of judges from the I.I.I. and the University of Pennsylvania’s Wharton Risk Management and Decision Processes Center selected the winners.
First place in the Insurtech category was Wildfire Protect– a parametric wildfire insurance product designed to provide immediate payouts to insureds that experience property damage from wildfire.
Second place was a tie between Prophet Profit and Navig8. Prophet Profit is an app designed to help households save money by allocating funds in all sectors of the stock market. The Navig8 team created an app to assist the visually impaired communicate during a disaster.
First place in the resilience category was awarded to a hack called Phoenix. This team created an autonomous drone which detects and extinguishes fires.
As of early afternoon on September 4 Hurricane Dorian was approximately 100 miles off the east coast of Florida. The National Hurricane Center reported that Hurricane Dorian would likely move slowly up the Florida coast to Georgia and the Carolinas. While the storm’s intensity has declined since it struck the Bahamas as a Category 5 hurricane, Dorian is now classified as a Category 2 hurricane with sustained winds of 105 mph.
Federal emergency declarations are in effect for Florida, Georgia, South Carolina and North Carolina, and the governor of Virginia also declared a state of emergency. Dorian is expected to maintain its current intensity for the next few days, and forecasters said that those in Northeast Florida to the Carolinas should be on alert for the possibility of destructive winds and flooding from heavy rains or storm surges.
Dr. Phil Klotzbach, a meteorologist at Colorado State University and Insurance Information Institute non-resident scholar, is providing regular updates on Dorian via Twitter. He said that the storm has now generated the ninth-most accumulated cyclone energy by an Atlantic hurricane named during August in the satellite era (since 1966).
In a Fox Business interview, Michael Barry, senior vice president and head of media relations and public affairs at the Insurance Information Institute, said,“The industry is very well capitalized and has the financial wherewithal to pay whatever claims comes its way. Of course, right now, we’re looking at the priority of making sure everybody’s customers are safe and sound.”
An Artemis blog post said that even if Dorian remains just offshore, some sources expect a low-single digit billions market loss from the hurricane, just from wind and surge damage along its track. That figure would rise with every mile closer to shore the eye of Hurricane Dorian comes.. Any wobble west onto shore or a full landfall could raise the potential insurance, reinsurance and insurance-linked securities (ILS) market impact significantly.
Recovery from Dorian in the Bahamas and other islands of the Caribbean that were impacted is expected to be slow because most of the damage caused by the storm is not covered by insurance. In a Wall Street Journalarticle, Steve Bowen, a meteorologist and head of catastrophe insights at Aon plc, said that commercial businesses have the highest levels of insurance penetration in the Bahamas, while many individuals lack coverage.
Jonny Urwin, an analyst with UBS Group AG, said it estimates that insured damage in the Bahamas could be between $500 million and $1 billion. For the storm overall, UBS projects that the total insured losses from Dorian could be between $5 billion and $10 billion, basing its estimate on a comparison with Hurricane Matthew, which followed a similar path in 2016.
