The Carrier As Trusted Advisor: A Gift Fresh From California (Regulations)

Much ink has been spilled over the new(ish) California wildfire regulations, and rightly so. While the regulator may be signaling that it is inflexible about reasonable rate increases, it has at least allowed insurers to take into account ‘future risk factors’. I am sure to anyone outside of the industry this would come as shocking news considering the very nature of risk is future-looking, and any reasonable account of it should be expected to consider… the future. Nevertheless, at least now carriers, in California at least, can take this reasonable approach. 

But there was another critical element in the legislation as well: carriers must now act much more transparently, must essentially share their risk scoring (their ‘rating plan’), and share that score with prospective customers – or, presumably, renewing ones. On a related note, significant focus is placed on wildfire risk scoring and classification, with it being incumbent on the carrier to not only share scoring and classification, but also to advise potential policyholders about what measures they can take to get a better score.

That last bit’s pretty important – suddenly the carrier finds themselves not only in the newly-transparent rating game, but also in the advising game. Is this a burden or an opportunity? How will this translate to other states’ regulators? Does it matter?

Rating and advising: the opportunity

Carriers will soon need, in California at least, not only to expose their risk ratings, but also to explain them to homeowners, give homeowners the opportunity to improve theirs, and even open themselves up to appeals. The best carriers will rise to the occasion to build, buy, or partner their way into homeowners’ lives as trusted advisors. 

Getting ahead of the game

Imagine homeowners self-reporting on critical details of their homes in order to get an immediate non-binding wildfire (or other) risk assessment. Core elements of wildfire risks are well-understood and even defined in California legislation – things like the presence of combustible structures outside the home, fire-rated roofing materials, multipane windows, etc. Carriers are so close to this that many don’t realize that the typical homeowner may not understand the benefit of close eaves on their roof, non-combustible foundation materials extending up the structure, closeness of vegetation, etc. Alerting them to not only what to look for, but what they can do when they come up short can be a tremendous relationship-builder. Homeowners that see their insurer not as a hostile and oppositional entity, but an eager partner interested in helping them stay safe in their homes can spell an important competitive advantage. 

And why stop there? Just because California places extreme emphasis on wildfire risk does not mean that other risks can’t be addressed in the same way. Think of flooding, hurricane, hail, or other risks that can be mitigated by the homeowner. Insurers know that storm shutters, wind-resistant roofing materials, and other measures can make important differences in avoiding claims or at least limiting their severity. 

And California is far from the only state subject to catastrophic climate risk. With hurricanes becoming more prevalent, can the Eastern Seaboard be far behind in legislation like this? Insurers may not need to actually share scoring and categorization data in those states (yet), but there’s nothing stopping them from taking the spirit of that legislation and sharing with customers what building types and characteristics are likely to be safer and less prone to damage. Or even helping them understand what they can do to improve their own home’s resilience. 

Making it personal

Which brings us to the most important part of the carrier as a trusted advisor: meeting the homeowner where they are. California has legislated some personalization in the requirement to share scoring models with customers and explaining how they can improve their wildfire scores. But there is more to risk than wildfires, and there’s more to relationships than sharing simple algorithms. 

  • About the home

Great carriers will take information they know not only about a specific region and home type, but also information they know about a particular home. If the insurer does not have it, partners are available to provide it – structure type, fireplaces, and other data elements are available. Homeowners can be asked too, and when the question is posed properly, they will be happy to provide more information because they understand that the carrier and the homeowner are on the same page. 

  • About the customer

Different customers will be reached in different ways, and different programs and services will resonate with them depending on their needs. First time homeowners may need the basics laid out for them with resources, tools and checklists. More experienced homeowners may find the most benefit in connecting them with services that can help them with renovations to their home that will pay off in the long run. The same goes for channel selection: some homeowners will log on to a portal or website eagerly when customized tools and resources are there for them. Others will prefer a mobile app, and still others may need relevant articles sent directly to them by email. Carriers will also find that when they don’t know what their customers (or prospects) want, all they need to do is ask.  

Bringing it home

At the end of the day, the California insurance regulator may just have given insurers what they needed – an opportunity to become part of homeowners lives as trusted and informed advisors. The best carriers will take this opening and apply it to all types of hazards, and to their entire book of business. They will take the homeowner’s perspective and create durable relationships that pay off for everyone.  

 

About David Sussman

David Sussman is CEO of The Alana platform by Plasmatic Technologies Inc. His mission is to help insurers reduce claims and increase retention by engaging policyholders with the right information at the right time, turning homeowners into onsite property managers. David is an engaged homeowner and father who believes in the power of technology to make lives better and bring people together.

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