This week, I'll quickly hit three themes, including an audacious new form of cyber attack and General Motors' decision to back down on sharing data with brokers from GM vehicles, in the face of a recent uproar. But I'll start with a step for homeowners insurance toward a "Predict & Prevent" business model and away from the traditional repair-and-replace approach.
Realtor.com said it will provide projections on climate risk for each listing. Heat, wind and air quality scores will predict what an area will experience, going out 30 years, supplementing existing data on fire and flooding, so home buyers can know more about what perils -- and high insurance premiums -- they may face as the years go by, BEFORE they make the purchase.
Economists at Realtor.com say some $22 trillion of U.S. residential properties are at risk of ‘“severe or extreme damage” from flooding, high winds, wildfires, heat or poor air quality. And First Street Foundation, which provides the data that is the basis for Realtor.com's analysis, says nearly 36 million homes -- a quarter of all U.S. real estate — face rising insurance costs and reduced coverage options due to mounting climate risks, First Street Foundation, a nonprofit that studies climate risks, says 18% of U.S. homes will be at risk of damage from hurricane-strength winds over the next three decades.
The projections will be far from perfect, especially in the early days, but the hope of the Predict & Prevent model is that we can keep adding intelligence to the system and help customers make decisions that let them avoid putting themselves at risk, long before a flood or fire or windstorm can damage or ruin their property. (If you're interested in learning more about what Realtor.com is doing, or about Predict & Prevent in general, I encourage you to check out The Institutes' Predict & Prevent newsletter. You can also sign up for regular podcasts on Predict & Prevent.)
Now on to the brazen new cyber attacks....
The Wall Street Journal reports that cyber criminals have gone far beyond stealing data and are now stealing data that they use to then steal physical goods -- they hack digital exchanges that facilitate shipping via truck and divert loads of products that they hold for ransom. The WSJ says reports of freight fraud more than quadrupled in 2023 from the year before, and fraud-related losses were estimated to be at least $500 million last year.
Criminals hack into an exchange that those shipping products use to coordinate with trucking companies and steal the unique identifier of a trucking company. They use that identity to submit a lowball bid and win the right to ship a truckload or more. The criminals then subcontract with an actual trucking firm that, not knowing it's participating in a crime, picks up the load or loads and delivers the goods to the hackers. The hackers contact the company that owns the goods and demand a ransom. Often, the goods are perishable, such as yogurt, and some store chain is angry about not getting its scheduled delivery, so a ransom is paid before authorities even have a chance to start unraveling the crime.
Everybody seems to be pointing fingers at everybody else. Those in the shipping industry say authorities need to do more to stamp out the fraud. Authorities, who say they don't have sufficient resources, say shippers, brokers and truckers could do a lot to police the problem themselves by watching out for bad actors and coordinating to kick them out of the system.
Trucking capacity was so scarce as the economy heated up following the worst of the pandemic that many shippers and brokers didn't pay enough attention to making sure that a trucker was legitimate, and fraud may abate as everyone -- including insurers -- pays more attention. Here's hoping. But in the meantime, freight fraud has become a major problem.
As for General Motors: Following loads of negative publicity (including from yours truly) about customers complaining that they were being tracked without their approval, leading to higher insurance premiums, the company said it would stop sharing data on drivers with data brokers such as LexisNexis and Verisk. That is a smart PR move, but I don't think the issue will go away. GM still faces a lawsuit that the plaintiff hopes will be certified as a class action, and the whole issue of tracking drivers, perhaps without their consent, seems to have drawn the attention of the Federal Trade Commission and of Congress.
Stay tuned.
Cheers,
Paul