Survey of 200 senior Property & Casualty insurance executives by ZestyAI has revealed rapid adoption of AI risk assessment models for wildfires and severe convective storms

The report also reveals that 73% of insurance industry leaders believe AI models help to manage climate-related losses

90% call for more transparency in predictive modes to help insurers communicate policyholders about possible risk mitigation

Contrary to headlines, most insurers are prioritising inspections, manual reviews, deductible strategies, and ACV roof endorsements over nonrenewals, which only 32% prioritize.

ZestyAI, the leading provider of climate and property risk analytics solutions powered by artificial intelligence (AI), has released a survey of how 200 senior insurance leaders are responding to the challenges of extreme weather events. 

The research revealed rapid growth in insurance organizations using AI modelling to risk assess extreme weather events. One in four now use AI for convective storms and 18% for wildfires. Stochastic models remain the most popular approach for storms with 45% saying it is their go to tool and traditional actuary models based on historical data are favored by 54% for wildfires.  

When asked which type of model is most accurate for predicting risk, answers varied, revealing a lack of agreement in the industry. 27% of respondents believed traditional actuarial models to be the most accurate, while 26% favored stochastic models. Only 20% considered AI and machine learning models to be the most accurate. However, 27% of respondents believed that a combination of different models offers the best risk prediction. 73% of insurance leaders also believe AI models will help to manage climate-related losses. 

Senior managers in the actuary, product management, and underwriting departments are most worried about severe convective storms – with 34% saying it is the most important issue they are facing. Insured losses from severe storms in the U.S.  rose from $30 billion in 2022 to over $50 billion in 2023. 

The most important criterion for selecting an AI-powered predictive risk model is widespread adoption within the insurance industry. 45% ranked this as their number one or number two choice, followed by adoption by trusted peers (40%), and price (37%). Regulatory approval ranked lower at 31% and model transparency at 20%. 

There is widespread consensus that AI is important for the future of the insurance industry with  80% saying it is enabling new avenues of profitable growth and 73% stating that carriers who adopt AI will outcompete those that do not. Of the leaders surveyed who have already adopted AI risk models, 81% believe they are ahead of their competitors when adapting to the challenges of climate change, this figure drops to 66% for respondents who still favor traditional models. 

Attila Toth, Founder and CEO of ZestyAI, said: “With the growing threat of extreme weather events, we are seeing accelerated rates of adoption of AI-driven models within the insurance industry to assess risk.

“AI has an incredible capacity to transform the insurance industry by enhancing the capability of carriers to protect the assets and wellbeing of policyholders in an increasingly complex world. This enthusiasm is reflected in our research – the consensus among insurance leaders is that AI will be a crucial enabler for realizing profitable growth going forward.”