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With cloud-seeding now a reality, insurance should harness technology to address the challenges posed by climate change.

Just a few weeks ago, Dubai experienced severe flooding due to heavy rains—the heaviest since the 1940s.

This raises two questions: First, what factors should insurers consider when determining coverage for damages from climate change? And second, how can insurers effectively manage risks associated with cloud seeding-related claims?

To address these questions, Insurtech solutions offer a promising avenue to not only streamline insurance operations but also enhance risk management practices.

Climate risk and insurance

Climate change isn’t just a distant threat anymore—it’s happening right now, all around us. 

Today, we’re experiencing more frequent and severe weather events than ever before, and UAE serves as a testament to this reality. The recent floods turned main country roads, particularly in Dubai, into waterways, leaving motorists stranded and causing widespread damage to commercial and residential properties.

Traditional insurance methods are feeling the strain. While policies like motor and homeowners’ insurance typically cover events like earthquakes and floods, they become strained when many policyholders are faced with the peril at the same time. Asides that, insurers may refuse coverage for events deemed man-made like cloud seeding. 

Whether the Dubai floods were man-made or not, that’s a discussion for another day.

Insurtech’s response to climate change

Predicting and accurately assessing the risks posed by climate change has proven difficult with traditional underwriting methods. Add to that, engaging other disciplines like meteorology and seismology for risk assessment and claim investigation adds to the complexity and cost.

Fortunately, Insurtech—the integration of technological innovations into the insurance industry—is changing the game. Insuring against climate-related risks is now easier and more cost-effective than ever before, thanks to Insurtech’s ability to bring savings and efficiency to the insurance model.

Insurtech trends and success stories

Advanced analytics and predictive modeling

Insurtech companies employ sophisticated data analytics algorithms for more accurate assessment of climate-related risks. Through analysis of historical weather data, satellite imagery, and other relevant information, these solutions predict the likelihood and severity of extreme weather events.

 Twinn, a software platform developed by Royal HaskoningDHV can provide a climate risk assessment that helps you visualize physical risks and identify hazards as they develop. 

Drones

Drones equipped with high-resolution cameras and sensors revolutionize risk assessment and claims processing in the insurance industry. 

Insurtech firms deploy drones to conduct aerial surveys of properties, infrastructure and disaster-stricken areas, enabling faster and more accurate assessment of climate-related damages. Customers will then benefit from faster claims processing and eventual settlements.

Blockchain

Blockchain technology provides a transparent and tamper-proof platform for managing insurance contracts, especially those tied to climate-related risks. 

Insurtech startups like Arbol explore the use of blockchain-based smart contracts to automate the execution of parametric insurance policies triggered by specific weather events or environmental indicators. 

This ensures timely payouts to policyholders in climate-related disasters, reducing administrative overhead and enhancing trust and transparency in insurance transactions.

Microinsurance

Microinsurance, providing affordable coverage to low-income and underserved populations, is increasingly employed to tackle climate-related risks in developing countries. 

Lemonade has collaborated with local organizations and mobile technology providers in Kenya to deliver microinsurance products safeguarding vulnerable communities against weather-related disasters like droughts and famine.

Conclusion

As climate risks escalate, Insurtech emerges as a beacon of hope. By leveraging technology like smart contracts climate coverage can be automated in a way that when conditions have been met i.e. heavy rains being recorded then insurance settlements will be paid out automatically to all policyholders. 

This, alongside other discussed examples, demonstrates how Insurtech innovations can practically enhance and improve insurance operations. Insurers can navigate uncertainties, address coverage dilemmas, and effectively manage risks—ultimately safeguarding communities in an ever-changing climate.