Carriers must educate policyholders on weather damage risks, Nationwide P&C exec says

Property and casualty insurers need to work through misunderstanding of their role in managing increased climate change damage, said Casey Kempton, president of personal lines at Nationwide, speaking at Insurtech Insights in New York on June 5.

Pointing to a 2023 survey by the Insurance Information Institute that found that 25% of homeowners think they will never suffer a weather loss, Kempton said, “There’s an aspect of prevention and work on preparedness that insurance carriers can play a more active role. In a lot of cases, that will be arming our partners and distribution – independent agents – to better guide their customers. But consumers have to think about the exposure.”

For instance, Kempton pointed to an Iowa radio DJ’s comment after a recent damaging hailstorm, that at least he would get a new roof from his insurance company. 

“There’s a mindset there that when bad things happen, the insurance company will not just make me whole, they will give me more,” Kempton said. “We just need to understand, is that actually what my insurance premiums are paying for? The consumer mental model for what insurance is, is a little bit challenged. It’s about risk transfer. It’s not a home maintenance policy. That is confusing to some.”

She went on to detail what ought to be understood. “The insurance companies are there for you at a time of loss,” she said. “We have to adjust the claims fairly, we have to understand the value. Consumers have to recognize what they’re paying for, and how much damage should really be covered in that.”

State insurance regulators in some states have stepped in with efforts, including data calls, to make home insurance more available and affordable, after carriers pulled out of some markets due to elevated weather event risks. 

The regulators are acting to protect policyholders, Kempton said. “Regulators do have a duty to benefit their constituents by working with insurance carriers and really making sure that we’re never taking advantage of the situation,” she said. However, she added, “Regulators aren’t always open to how we adjust our models and how we predict future loss. It has to be a dialogue. We can’t take premiums up exponentially year over year over year. We do have to work together on a glide path to long-term stability overall.”

It is possible for carriers to work with regulators to address how weather risks can be covered, according to Kempton. “There is an openness in many states to actually understanding peril, and specific loss costs relative to what they have been in prior years,” she said. “As carriers lean in toward that educational component, the risk component, they really are trying to see the total problem and not just taking rates or adjusting underwriting filters. That’s when you start to demonstrate there’s some proof points there, that we can work together on this, from the carrier perspective.”