The State of Property Intelligence in 2023

Property intelligence refers to a diverse category of datasets, insights, and tools which reveal information about a property over and above what is visible to the naked eye. Over the last several years, many insurance companies have come to rely on such tools in order to analyze, score, manage, and monitor risk. Although some insurers may choose to build in-house solutions, more and more have opted to partner with third-party insurtech companies. Consequently, there has been a rise in companies – such as Betterview – which strive to provide insurers with high-quality, reliable, transparent sources of property intelligence. As the new year begins, it is prudent to discuss ongoing trends within the P&C insurance industry as they relate to property intelligence. In short, what property intelligence trends should insurers watch out for going into 2023? 

Outdated Climate Models will be Replaced 

Rising temperatures and volatile weather patterns have shaken the very foundations of how insurers analyze and manage risk. In the past, insurers relied on climate models built on historical data in order to predict future weather events. In the era of climate change, however, these models have become obsolete. Rainfall reports from NOAA, for example (known as Atlas 14), are decades out of date. Atlas 14 reports are used by insurers when pricing policies and evaluating risk, but they have not kept pace with climate change.

Congress passed bipartisan legislation earlier this year to “modernize and update” these reports, but this was only the beginning. Expect state and federal agencies to focus even more this year on improving climate models for rainfall, wildfire, and hurricane activity in 2023. These models will rely heavily on property intelligence (including both regional hazard data and property-level vulnerability), improving their ability to identify and manage real risk. By gaining access to these new and improved models, insurers will be better equipped to predict and prevent losses and damage.    

Property Intelligence will Help Insurers Respond to New Legislation 

Perhaps the most significant development for insurance companies in 2022 was the passing of legislation in Florida and California responding to worsening hurricanes and wildfires. In 2023, insurers will have to grapple with the reality of these laws for better and for worse. The laws put more stringent requirements on insurers to provide protection for communities most vulnerable to hurricane and wildfire damage. Some companies have responded by cancelling policies en-masse, or even ending business entirely in these states. Others have begun to adopt new technologies – including machine learning, computer vision, and other sources of property intelligence – to maintain profitability while adhering to the new laws. In the years to come more and more states will follow these examples and pass legislation that directly impacts the property insurance market. Forward-looking companies should focus now on proactively adapting to these laws, preparing themselves for the future. 

Insurers will Winterize for a Turbulent Economy 

Inflation remains high and leading economists continue to predict a recession in the near future. In anticipation of economic downturn, P&C insurance companies will double down in 2023 on “winterizing” their organizations. This does not mean there will be industry-wide panic or massive layoffs: experts agree that P&C insurers are more protected from recession than many other industries. It would be a mistake, however, to say that insurers are therefore “recession-proof.” In today’s global economy, there is no way to be completely protected from risk. The increased cost of building materials and property inspections, for example, have already had a major impact on combined ratios across the industry. Insurers will seek out any way possible to bolster their organizations in advance of a recession in 2023. Expect property intelligence to play a major role in insurers’ attempts to “winterize,” allowing them to optimize efficieny and improve expense ratios, while simultaneously predicting and preventing costly losses.  

Insurers will Face the Long-Term Impacts of COVID-19 

In 2023, the world will continue to grapple with the long-term impacts of COVID. It has become clear that remote work is here to stay. This will impact the P&C insurance industry in three ways. First, less employees working in physical offices means a reduced demand for commercial policies in some areas. Second, at the same time, a rise in working from home introduces its own unique liabilities. With more workers abandoning the office for the comfort of home, the pandemic saw a rise in the construction of secondary structures, sheds, and home offices. These kinds of additions will have an impact on overall liability; in 2023, insurers will need to review existing policies to determine whether adjustments need to be made. Lastly, the pandemic has complicated in-person property inspections, leading to the rise of remote and self-inspection companies such as JMI Reports. While some insurers may return to in-person inspections in 2023, the advantages offered by aerial imagery and computer vision tools mean that these methods will not soon be abandoned. 

As the nature of global risk continues to undergo dramatic transformation, insurance companies need to pay close attention to all of these trends. They should also understand the central role that property intelligence will play in forming their response. The world is changing, and companies must evolve their business strategies in order to survive. With a strong arsenal of property intelligence tools, insurers will emerge stronger than ever before