For insurers, brokers and their clients, unavoidable events that lead to claims are massively frustrating – both for the disruption they cause and their financial impact.
One of the most significant of these events is natural disasters, which statistics show have been increasing in frequency over recent years.
A risk insights report released last week by Zurich, at the United Nations Global Platform for Disaster Risk Reduction, outlined some of the research the company has been undertaking on how businesses can become more resilient to these events.
Michael Szoenyi, head of the Zurich Flood Resilience Program, said that the report had a number of interesting findings, including that risk is more universal than previously believed.
“Very often we think risk is something very contextualised, and it’s very individual, and you can’t really draw global lessons,” he said. “I think our report says the opposite - that there are a lot of global lessons to be learned, that are universally true almost.
“One is around risk awareness, one is around the challenge of how we incentivise prevention and early reaction, as opposed to post event relief and recovery. This is something we see across the board.”
The report found that one of the biggest challenges was a lack of education in the client space – something the industry needs to tackle. The report focused on flooding in particular, an issue that is common in the UK.
“Some of the challenges that occur are due to a lack of risk awareness, a lack of interest in dealing with the risk topic before an event happens,” Szoenyi explained. “So how can we improve the language? How can we improve the motivation to deal with this concept?
“And it’s almost like a literacy thing. How can we educate people to be more aware of these things literally during sunny days? How can we get people interested in flooding when they are not occurring?”
The monetary factor is another that is huge, the expert explained, and the incentives are something that people often don’t understand.
“The other thing is the lack of incentives, and almost the creation of these incentives to not act, and then you pay the price when the event materialises,” Szeonyi explained.
“How can we make sure if the economic case is so clear, spending £1 early and £5 on average in future losses, how can it be that we still sit there and we don’t really feel the urge to start working on this until the disaster happens? Those are the underlying challenges.”
Another interesting finding was that there are a range of businesses impacted by these events - and the insurance community is often not reaching out to them.
“It impacts small business as much as large global multi-nationals. How can we really make sure that those who need the action, that are the most vulnerable, that would be affected by the causes the most, the consequential damage… how can we make sure that we reach those people?” Szeonyi said.
“I think the disaster risk reduction community is very much a group where we are preaching to the choir and not necessarily reaching those where the difference would be the biggest. So, it’s about how can we make sure we include the most vulnerable? How can we make sure we include the economically most unstable parts or groups of society?”
The expert’s final message was a simple one: prevention, prevention, prevention.
“We know that prevention works, and it can be easy,” Szoenyi said. “Prevention is not all about hard, big, expensive engineering that we need to have billions of dollars for financing first.
“There are so many low-cost and no-cost practical things that you can do including the education - to making sure you are taking the right action and behaving correctly, that kind of thing. Therefore, we should motivate people to take the easy steps first.”