November, 9

Can the insurance industry survive climate change?

Plus digital twins, the homeowner's dilemma, and a survival guide to the climate apocalypse.

👋 Hi friends,

It's the second Thursday of November. Welcome back to The Slice. This month, a topic we've been itching to talk about—one that in our opinion, could not be more relevant to the future of insurance. No, we're not talking about AI again. We're talking about climate change.

For months, we at Cake & Arrow have been tracking climate and insurance-related news, trading personal stories, and sharing articles on Slack. In fact, our list of bookmarks could have easily filled this entire newsletter (instead, we've included just a handful of our favorite takes on climate at the bottom of this email).

Generally, we’re interested in how the Venn Diagram of climate change and insurance seems to be closing in. These days, it's hard to read a perspective on climate change that doesn't discuss insurance. The two are so obviously connected. Yet coverage within the insurance industry itself doesn't seem to reflect the same urgency. Climate change is a topic among others, but seldom given its due as the existential crisis many believe it to be. While the industry is (obviously) not unaware of the issue, it often just doesn't seem to have much to say about it. In article after article, "no comment" is the most common refrain.

So can the insurance industry survive climate change? Probably not, the way things are going. But if we, as individuals are to survive it, it will be because the insurance industry has too. For better or worse, our fates are intertwined. This is why figuring out how to move forward into our increasingly volatile collective future and climate reality is more than a good idea. It's an imperative.

🎂  THE BAKER'S TAKE

A glimpse into how homeowners are experiencing the impact of climate change

Perspectives from our research on how the changing climate is changing attitudes around homeownership and insurance.

"Most people we have spoken with so far have already been impacted by climate change in some way—rising premiums, surprise weather damage, etc.. But only the unlucky few who have lost homes or suffered significant damage have any tangible sense of what the changing weather might mean for the value of their homes—and they certainly aren’t expecting their insurance companies to help them figure this out."

Read more →

🛡️  THE INDUSTRY'S TAKE 

Insurance has never been more relevant

If you were in Vegas last week at ITC, you may have been struck by the same discrepancy we were. The pervasive, almost inescapable imagery of natural beauty branding every corner of the conference space, juxtaposed with a conspicuous lack of meaningful discussion about the crisis and the inextricably connected predicted "insurance bubble." Outside a handful of (poorly attended) sessions there wasn’t a lot of engagement, unless you count the dozens of insurtechs there to help carriers underwrite and avoid taking losses on weather-related claims

But beyond pulling out of risky markets and figuring out ways to avoid claims payouts, (which seem to be the industry's primary tack, as of now), some of the more promising innovation is happening on the customer side of things—through partnerships with tech and non-profits utilizing open-source data.

Digital twins: Ecopia AI, which presented at ITC, is partnering with insurers to use geospatial analysis to develop 3D digital twins of infrastructure and land cover to help better predict and mitigate the effects of climate change.

Research partners: Both Allstate and American Family both recently announced partnerships with the non-profit research firm First Street Foundation to provide agents and customers with data insights and modeling to help customers better understand a property’s exposure to risk.

This is the kind of customer centric approach (in addition to more business driven approaches already in flight) to climate change that we’ll need to ultimately protect both the industry and its customer, without whom there would be no business of insurance.

Standing up: We agree with Aon's Jillian Slyfield who, on a panel at ITC about climate risk transition brought it back to the customer, seeing climate risk as an opportunity for the insurance industry to "rise to the occasion" and "increase our relevance with our clients."

🗽  OUR TAKE

Our team of strategists, researchers, and designers chime in on what the insurance industry can do to better protect customers from risks related to climate change.

Kate Muth, Director of Strategy

“In the near term, the insurance industry may not be able to quickly adjust its value proposition to new realities and market conditions. But it can do a better job acknowledging the pain homeowners are going through, and it can be a more open, supportive partner in facing the challenges together. Setting realistic expectations, sharing what insurance knows about how to prepare and prevent the worst outcomes, and being transparent about timelines and status can all go a long way in making policyholders feel like they’re not alone."

Jen LaRue, Director of Product

“I believe it demands a partnership between government, homeowners and insurance. What does this look like? A recent Economist article paints a pragmatic picture: Americans moving out of flood and fire zones, government programs like FEMA bailing some homeowners out, with the insurance industry free to set realistic premiums so they can keep writing coverage and deter building in unsafe places. But until policy and customer behavior adjust to this new reality, insurance has to focus on providing the best experience possible to the customers it can safely continue to insure, building trust with homeowners and their communities as we weather the future together."

Victor Lombardi, Product Strategist

“Let’s be honest: we don’t know. And that candor can position us to find better ways of working. Ben Thompson at Stratechery recently wrote an essay illustrating how predicting the future of product development is extremely hard. … When Steve Jobs was asked about the future he said, “I don’t know.” People outside Apple invented all sorts of apps for the iPhone that Apple never anticipated. Some of those failed, and others thrived. For Jobs, “the art of it is balancing what’s on there and what’s not — it’s the editing function.” Similarly, we may need to create platforms on which a thousand new insurance ideas can be tested."

What do you think insurance can do to better protect its customers from threats related to climate change? We'd love to know! Tell us here.

🌐  THE INTERNET'S TAKE 

Best climate reads out there. Sourced from our crew at C&A.

How to prepare to lose your home in a climate disaster →

There's more to prepping than canned beans and bottled water..

Uninsured → 

A four-part Grist series examining how climate change is destabilizing the global insurance market.

Climate risks worry home buyers, especially on the West Coast → 

More than 90% of buyers in Pacific states are considering risks like wildfires, heat waves or flooding.

3 cities face a climate dilemma: to build or not to build homes in risky places →

Towns across the U.S. want to stop building homes that are vulnerable to climate-driven disasters, like wildfires, floods and droughts.

Rebranding global climate change  →

Ivan Ehlers jokes about different ways to rebrand global climate change.

Restoring the planet will need more than a climate price tag  →

Could proposed “solutions” to our climate crisis be worse than the problem? 

Oh, and in case you missed it ...

A few weeks back, Josh Levine, designer, founder, and CEO of Cake & Arrow hosted a webinar exploring why good design and customer experience should be a strategic investment for every insurance organization. The on-demand version is available now.

Watch the webinar →

Cake & Arrow is a UX design & product innovation agency that works exclusively with insurance companies. We help carriers, distributors, and service providers to uncover new opportunities in unmet customer needs and design innovative products and services that drive change and business growth.

Visit cakeandarrow.com →