For many homeowners, sudden big jumps in insurance premiums are a tough pill to swallow. When extreme weather events like hailstorms or wildfires hit hard, insurance companies often raise rates sharply to cover those costs. This kind of rate shock can leave customers feeling frustrated and blindsided. It also puts insurers under pressure from regulators and rating agencies, making trust harder to maintain.
The problem is that insurers usually raise premiums after a costly season, basing rates on past losses instead of future risks. This reactive approach leads to sudden, steep increases that strain household budgets. But there’s a better way. Using forward-looking climate data, insurers can foresee risks years ahead and adjust premiums gradually. This method means smaller, more manageable yearly increases instead of painful surprises all at once.
Take, for example, a regional carrier in Illinois and Ohio. By using climate models based on moderate warming scenarios, they found that expected losses from severe storms could rise by around 3-4% by 2030 and about 11% by 2050. Knowing this in advance means they can spread rate hikes over several years, helping customers plan their finances.
Besides easing the burden on policyholders, steady rate increases help insurers, too. Predictable pricing supports better capital planning, cuts down on regulatory hurdles, and shows responsible management. At the same time, homeowners get a chance to prepare for rising costs or take steps to strengthen their properties.
To make this work, insurers need the right tools. Effective climate modeling should cover multiple warming scenarios, various extreme weather types, and precise location data down to individual properties. It should be updated regularly, easy to understand, and fit smoothly into existing systems without large technical overhauls.
One solution meeting these needs is offered by Cotality with their Climate Risk Analytics platform. This tool uses detailed climate models to predict future risks for specific locations. It looks at seven different property threats, including hurricanes, floods, wildfires, and storms. Insurers can use the data in many ways, from adjusting premiums to planning reinsurance or managing capital—all while keeping IT work minimal.
Cotality’s approach helps insurers shift from reacting to past disasters to planning ahead. That way, customers won’t face shock rates after a bad season. Instead, they’ll see steady, clear, and fair premium changes that support long-term security—just what insurance should provide in today’s changing climate.
For those interested in learning more about this forward-thinking climate tool, additional information is available through Cotality’s website.