Ensuring the future: Exploring insurtech's influence on climate resilience efforts

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The insurtech blitz of the past decade was a boon for carriers, managing general agents (MGAs), brokers and more across the insurance spectrum. Insurtech innovation offered ample reasons for good times; insurtechs provided streamlined processes, better distribution, cost savings, enhanced customer experience and more.

A byproduct of insurtech’s growing influence has been the opportunity for organizations to improve their own sustainability efforts and protect against or mitigate evolving climate and disaster-related risks — encouraging more resilient communities. With investors in insurtech more closely securitizing both market trends and emerging insurtechs, will this progress toward environmental action wane as well?

In this article, we will explore a few of the impressive advancements insurtechs have presented or influenced in recent years and consider what a muzzle on insurtech innovation could mean for sustainability efforts.

Growth, change and opportunity
The global insurtech market enjoyed tremendous growth in recent years with equity funding reported at $9 billion in 2018 and rising to $14.5 billion in 2021, according to Boston Consulting Group. However, investments across the entire fintech spectrum pulled back between 2021 and 2022 as investment in the sector fell from $139.1 billion to $79.9 billion — with insurtech funding experiencing the largest decline. Equity funding for insurtech fell 50% from $14.5 billion in 2021 to $7.2 billion in 2022. And according to BCG, “The market shows no sign of a rebound.”

However, tech-enabled carriers and MGAs making considerable strides to address climate change-related risks and encourage sustainability rely on the very tools and thinking insurtechs offer for scale and innovation. The decline in funding, coupled with the ongoing hard market, could reduce the number of these tech-enabled initiatives that offer contributions to greater sustainability. One need only look to California and Florida to see how insurers are shifting their focus to cost-savings to protect themselves from climate-related exposures like wildfires and hurricanes. Even Hippo paused its new business in 2023 to regroup and reduce its losses as access to capital, coupled with rising claims and a hard market forced many in the space to become more circumspect.

Fortunately, a silver lining exists for the resulting gap in coverage as well as a gap in future-focused carriers and MGAs that result from these challenged economic times. This environment will help to incubate more innovative and nimble MGAs to fill both gaps. Creative underwriting and tailored insurance products will be an absolute necessity as coverage needs continue and the growing number of climate events require not only repair and rebuilding, but doing both more safely while also working to mitigate risk going forward.

These are areas of change and opportunity for good insurtechs to provide innovative digital platforms that will improve distribution of these future-forward insurance products, streamline underwriting and operations as well as enhance the customer experience.

Tech-savvy insurers changing the landscape for the better
The past decade ushered in an array of tech-enabled insurers and MGAs with new solutions aimed at mitigating evolving or emerging risks, including exposures related to flooding and other natural disasters. Many of these insurers are supported by insurtech platforms to streamline operations and provide scalability, including:

Moonrock Drone Insurance is an MGA that administers insurance policies for the drone industry, providing solutions that address drone pilot specific risks like cyber security and privacy. While feelings may be mixed regarding the use of drones generally, they offer many positives for society, Moonrock explains. Drones are helping build a better future through 3-D mapping of landscapes, by monitoring irrigation levels for crops, by protecting wildlife from poaching and, of course, helping to identify flooded and damaged areas after disasters. Employing a no-code digital dashboard empowers Moonrock to quickly and easily adjust products to keep up with the evolving market, new regulations and more.Flow Flood Insurance is an MGA that leverages advanced mapping technology to enable homeowners to receive a rate for flood insurance more in line with their property’s actual flood risk. Employing a cloud-based, digital platform enables Flow Flood to offer agents faster quotes, as well as application e-signature options, direct bill renewal and a client portal. Green Shield Risk Solutions is a specialty insurance services company with the goal of building “a world resilient to climate disasters through data analytics and specialty insurance programs.” Green Shield uses technology and countless data points to assess risk against catastrophic events that enable informed underwriting decisions and risk mitigation strategies. Their analytics are designed to help insurers, policyholders and communities understand their risk to catastrophic exposures and how to monitor for them. Its employment of a digital platform enabled Green Shield to launch a new homeowners’ platform that offers quote, bind and management of high-value home insurance in high-risk states in just 90 days.

In each of the examples above, environmental awareness is on display not as a nice-to-have, but as a paramount feature that also serves as a competitive differentiator for other industries. And those industries are taking note. Apple’s recent Mother Nature sustainability report makes clear sustainability as a business imperative is now part of the economic norm, which in turn should promote growing adoption.

Inspiring community resilience, reducing carbon footprints
Insurtechs have pioneered the way forward for insurance companies, working to address changing climate risks like floods, wildfires and earthquakes. These efforts provide for more disaster-resilient communities and respond to the needs of insureds more quickly in an environment where speed of response is often critical.

At the same time, insurtechs are also helping these insurers reduce their own environmental footprints by providing digital-over-paper and cloud-based solutions. While some of these approaches employed may seem minor individually, cumulatively they are impactful in reducing each company’s — and therefore the industry’s — carbon footprint. These include:

Real-time policy acquisition versus in-person sales experiencesDigital versus in-person inspections with policyholdersA fundamental shift to electronic paymentsGreater adoption of e-signatures and electronic document deliveryInternet of Things and telematic data collectionRemote and hybrid work environments for geographically dispersed employees

Specifically, the digital systems provided by insurtechs can also help these companies to more easily comply with ESG regulatory requirements.
From a data collection and application standpoint, insurers today have a far greater understanding of risks such as flood and hurricanes than was possible 10 years ago. This data has the potential to allow insurers to analyze the risks presented by the projected trajectory of an oncoming hurricane, for example, and alert their insureds accordingly. Applying data analytics in the telematics environment, insurers might also be able to mitigate risk to personal or commercial auto insureds using location data in situations involving hurricane or flood events. Not only would these applications help protect lives and property, but they also have the potential to reduce environmental impacts of gasoline and other contaminants from vehicles, storage tanks and other physical plants or equipment from being exposed during a CAT event.