ZestyAI and IBHS Collaborate to Make Hail Losses More Predictable

The organizations have released new research showing that high concentrations of small hail are more important than previously thought.

(Image source: IBHS.)

ZestyAI (San Francisco) and the Insurance Institute for Business & Home Safety (IBHS, Tampa, Fla.) have released new research examining catastrophic losses from severe convective storms, particularly hail. The study, Small Hail, Big Problems, New Approach, shows high concentrations of small hail are more important than previously thought. In 2020 he two organization announced that they would collaborate on the study of the effects of weather and climate catastrophes.

Ian Giammanco, PhD, Managing Director, Standards and Data Analytics, IBHS.

A statement from the ZestyAI on the collaboration notes that hail losses are a persistent problem for property insurers’ risk management efforts. Historically, carriers have focused on intense events to predict hail risk, with supporting data confined to storms with hailstones larger than one or two inches. The study Small Hail, Big Problems, New Approach shows high concentrations of small hail are more important than previously thought, pointing to an opportunity to broaden data sets to account for the cumulative effect all hailstorms have on a roof’s susceptibility to damage over time, leading to a claim.

This new research shows all hail needs to be accounted for when modeling and ultimately understanding losses, the statement says. Using data from all hail events, not just those with hail that meet the severe criteria of one inch or greater, allows carriers to consider valuable data on smaller hailstone impacts. Additionally, insurers can integrate climate and materials science to better understand hail frequency and severity. Research suggests using this new approach could perform as much as 58 times more accurately than looking at events with large and very large maximum hail sizes alone, allowing carriers to more effectively assess hail risk, achieve more profitable underwriting and open up ratings to previously avoided areas.

“As we’ve learned more about hailstorms, we’ve discovered storms that produce large concentrations of small hail are more common than we thought, and despite causing less individual damage than a single large hailstone, small hail, especially in high concentrations, is likely a meaningful contributor to the loss we see each year from hail,” comments Ian Giammanco, PhD, managing director, standards and data analytics, IBHS. “Experiments also show large concentrations of smaller hailstones cause degradation to the asphalt shingles, specifically dislodging large amounts of granules. Once enough granules are lost, the underlying asphalt material can become more susceptible to aging and weathering. Repeated exposure to these types of hailstorms can shorten the life of an asphalt shingle roof and increase the damage caused by large hailstones in the next storm.”

Better Approaches to Hail Risk

Attila Toth, CEO, Zesty.ai.

“Hail losses are a persistent problem for property insurers’ risk management efforts,” comments Attila Toth, founder and CEO, ZestyAI. “Three of the nation’s five largest publicly-traded P&C carriers mentioned hail as a key concern in 2022 financial reports. Greater losses have brought attention to hail risk, and the insurance industry needs better approaches to solve this problem.”

The Zesty statement observes that hail risk can be especially costly to insurers because, unlike other catastrophic perils like hurricanes and wildfires, it can be difficult to identify the storm that caused a hail claim. As a result, insurance carriers could be forced to raise overall premiums or introduce high deductibles to compensate for the added costs.

As climate and materials science have developed, more data has become available providing improved hail risk evaluation options that can lead to better decisions at earlier stages of the policy life cycle, according to Zesty. The vendor asserts that other benefits could include more profitable underwriting, a greater ability to rate previously-avoided areas and significantly reduced loss ratios.

Zesty.ai and IBHS to Partner on Predictive Analytics for Climate Risk

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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