Although 2020 kept dishing out pain last week — the pandemic, the economic crisis, the protests and counter-protests on racism, our crazy politics and even wildfires and hurricanes — one event wasn’t as absolutely awful as it could have been.
It was still awful: Hurricane Laura caused billions of dollars of damage and killed 14 people in Louisiana and Texas. But the hurricane didn’t cause nearly as much damage as initially feared.
That suggests that people are starting to take the sorts of precautions that will be increasingly important as we have to adapt to the changing climate. Those precautionary principles also represent a key opportunity in front of the insurance industry: to go from indemnifying customers after a loss to helping them avoid those losses in the first place.
Now, some of what happened with Hurricane Laura was just good fortune. The hurricane pretty much threaded the needle between New Orleans and Houston, so it hit mostly rural areas, not the dense populations and expensive properties in those metropolises. The hurricane moved inland quickly, rather than sitting over an area and dumping tens of inches of rain, as Hurricane Harvey did to Houston in 2017. The storm surge, predicted to be as high as 20 feet, peaked at about 11 feet — still an almost inconceivable wall of water washing inland, of course.
But, as this New York Times article details, people mitigated the damage because they learned lessons from Hurricane Rita, which hit Louisiana and Texas in 2005. Rita killed 120 people and did some $25 billion in damage (measured in today’s dollars), including business interruption. Because of Rita, building codes have become much stricter, and structures more resilient. Some houses near the coast, for instance, are now on stilts 15 feet high. Partly as a result, while Laura’s winds were even stronger than Rita’s when the hurricanes made landfall (150 mph vs. 130 mph), the early estimates are that Laura did about $20 billion of damage while killing those 14 unfortunate souls.
Again, the storm was a catastrophe. I grieve for those 14 people, for their families and for all those who are now having to try to knit their lives back together after suffering $20 billion — $20 billion! — of damage. But, assuming that the difference between Rita and Laura wasn’t just 2020 finally cutting us some slack, there has been considerable improvement in the resilience of those in the hurricanes’ path, and I vote for more resilience, with the insurance industry helping as much as possible.
Technology should help. With Laura, the National Hurricane Center got the time of landfall precisely right, more than 3 1/2 days in advance, and was only a mile off in its prediction of the location of landfall. Predictions will only get better, giving people more time to evacuate or find shelter.
The industry can also mine its data for insights that will help people prepare better. For instance, of the 14 people who died in Hurricane Laura, more than half succumbed to carbon monoxide poisoning emitted by emergency generators. With that pattern identified, carbon monoxide poisoning seems like a danger that can be reduced or even eliminated through better inspection or education for those using generators.
Government will need to play a role, too, as climate change intensifies storms and raises the level of the oceans, endangering coastal communities. The Federal Emergency Management Agency (FEMA) has already funded “buyouts” of 43,000 homeowners in the U.S. who chose to relocate rather than continue to fight nature in places such as Isle de Jean Charles, in Louisiana, which has been 98% swallowed by the Gulf of Mexico.
We’re still not out of the woods even on this year’s hurricane season, let alone on everything else that 2020 is throwing at us, but maybe we can take a lesson from Rita and Laura. Maybe we can learn how to be even smarter and more resilient, and maybe the insurance industry can lead the way.
P.S. Here are the six articles I’d like to highlight from the past week:
Machine learning can speed underwriting while reducing costs and providing valuable information on why certain proposals fail.
77% of chief information security officers identified incidents that they feel they need cyber coverage for and report being unable to get it.
Insurers must examine customer pain points and life changes and accelerate digital adoption.
Events have forced C-suite leaders to realize that their digital transformation efforts need to be expanded and accelerated to light speed.
With AI able to assess cyber risk, cyber insurance no longer has to be a long, drawn-out and complicated process.
Insurers and solution providers are making significant advancements to speed delivery of payments and expand digital payment options.