As the Intergovernmental Panel on Climate Change noted in their sixth assessment report, Climate Change 2022: Impacts, Adaptation and Vulnerability, it is “unequivocal that climate change has already disrupted human and natural systems.”

As the Atlantic hurricane season kicks off on June 1 and stretches through November 30, understanding the ways in which climate change is continuing to affect our world becomes more critical. 

We already know, and the report echoes, the observed impact frequent and severe events have had, including heavy precipitation, hotter extremes in both the land and ocean and more drought and fire weather. These events have destroyed homes and communities, made it difficult to work, damaged infrastructure, exacerbated socioeconomic differences and more. 

The Climate Change 2022 Report also outlines extended ramifications across biodiversity loss, unsustainable consumption of natural resources, land and ecosystem degradation, rapid urbanization, human demographic shifts, social and economic inequalities and even a pandemic. Some of these effects have already occurred and are irreversible, including great losses in ecosystems, mass mortality events on land and in the ocean and a great poleward migration of half of the species assessed globally.

For insurance companies, who have been grappling with how to continue to conduct business in this seesaw environment, the report is sobering. 

How do you effectively insure properties which, via sea level rise, may one day be under water or via heat wave may unexpectedly burn to the ground? How likely is that to occur, and when precisely will it happen? How do you ensure you’re insuring the right risks and are able to deliver on the promise of protection? And what does the landscape of risk look like today? 

For carriers, climate change is fundamentally a portfolio-level problem, changing risk profiles of different geographies and increasing the severity of losses across the book. Much of today’s solutioning for this occurs via individual property analysis, by collecting and analyzing information point-by-point. 

This presents a great start to understanding and making tactical choices, but to understand the broader impacts on your business, and to prevent a worst-case scenario, it’s crucial to understand how it rolls up broadly as well. 

Here are four ways a portfolio intelligence engine can help visualize your risk at a given moment across the policy lifecycle, enabling a robust pipeline of new policies, decreased costs with claims payouts, and ultimately a healthy combined ratio. 

1. Climate change underscores the importance of keeping up on your knowledge of a property’s vulnerability. A portfolio view can help you segment and manage vulnerability en masse.

A home health check gives the carrier the opportunity to take on the heart of a teacher, develop a mentoring relationship with policyholders and offer feedback on how to build a resilient home. With Arturo’s portfolio engine tool, you can filter properties by neighborhood or region for excess tree overhang, unfenced pools, distance between vegetation and the home, poor roof condition and more, and you can send targeted communications to policyholders regarding the risk factors. This allows you to keep tabs on the condition of a home, reduce the risk and build a resilient portfolio.

2. Property is ever-changing. A portfolio engine can allow you to monitor those changes as they happen.

Risk selection is unquestionably the most important element of insurance to get right, and that choice occurs once a year. If you’re only assessing risk at first quote and not at renewals, you’re missing a major part of the story. According to the Home Advisor True Cost Report, the average household spent $13,138 on home services in 2020, with 63% of this sum allocated to home improvements. In addition, as home prices skyrocketed across the U.S., existing homeowners made big gains on their equity, giving them the means to remodel their homes.

With the intelligent portfolio engine, you can automatically flag properties that have changed significantly. This can help to reduce premium leakage and build a stronger book of business.

3. When losses do occur, like in the case of a catastrophic event, a portfolio tool can help to triage claims.

In spring of 2022, Eastern Australia experienced some of the worst flooding they had ever seen, with over two feet of rain falling over three days in Brisbane alone. By using a portfolio visualization, carriers can quickly understand and estimate reserves, they can respond faster to worse-off claims and work to prioritize response based on need, and they can partner, machine and human, hand-in-hand to understand what the property looked like beforehand to understand how the damage affected it.

Not only does this kind of methodology help curtail loss ratios by simplifying and reducing expense in manual processes, it also reduces the danger for adjusters (or assessors, as they’re known in Australia). The portfolio engine from Arturo allows you to associate claims to weather events to capture a full view of damage, and it even has the capability to overlay weather footprints on the portfolio to get a true sense of impact. This results in people getting help faster — and rebounding faster, which has the bonus effect of reducing churn.

4. You can even monitor material types at both the macro and micro level to help estimate costs.

By combining Arturo’s AI-derived property intelligence with policy information, you can understand and monitor material types like shingles, solar panels and more. In the event that a certain percentage of your portfolio were adversely affected by a climatic event, this view can help carriers gauge costs across a multitude of policies, laddering up the totals to help streamline rebuilding.

Climate change is ultimately a portfolio-level problem, and it affects insurance at every intersection, be it increasing risk at underwriting, emphasizing the importance of understanding renewals, adding to costs and losses at claims and making it challenging for policyholders everywhere. 

For a carrier, a portfolio engine can help to keep tabs on the situation as a whole as it changes every day.