In 2018, global insured losses from natural catastrophes hit $76 billion, the fourth-highest amount on record, according to Swiss Re. While some cities ravaged by hurricanes and wildfires in the past might be more prepared to deal with intense events today, other municipalities could be left underprepared.
“When some of the weather patterns shift, certain areas that may not have been affected as drastically by flooding or by hail storms, their infrastructure may not be prepared for some of that stress, so they are having to adjust their response to those changing conditions,” said Thom Rickert (pictured), emerging risks specialist at Argo Group US. “That’s not something that can happen overnight.”
Smart city technology can play a vital role in helping cities mitigate their risks when natural catastrophes strike. Currently, weaknesses in infrastructure are putting cities at further risk, even if a severe weather event hasn’t yet taken place.
“A couple of years ago, the tornado warning system in Dallas was hacked. It was a fairly easy hack and it was done because the system had not been upgraded with new security measures – it was a legacy system,” said Rickert. “Where you have flooding, because of the way open space has been developed and [there are now] more impermeable surfaces, the flood runoff changes. An area that may not have been prone to flooding in the past because there was open green areas to absorb heavy downpours, when you have concrete or asphalt on top of that, that changes the way water runs off and how it accumulates. That change in the infrastructure is influencing the propensity to flood and the severity of possible flooding.”
In response to past catastrophic events, some cities have already taken steps aided by smart technology to get all hands on deck for the next disaster, such as Houston looking into using sensors to more effectively monitor the inflow and outflow of water in sewer systems.
Implementing city-wide technology can seem like a time-consuming process that takes years to get off the ground, but many municipalities can actually move forward on these types of projects quite quickly.
“You can begin to crowd source and use the data that you already have in order to effect some positive change,” explained Rickert, pointing to modern 311 or 911 systems that can analyze collected data to determine, often using AI, what kind of calls require what kind of emergency response. “These are things that build on existing platforms, and even with sensors, you’re seeing the cost of a $10,000 sensor come down to $1,000, and [prices] that are more manageable.”
Nonetheless, challenges still exist in improving city infrastructure. Some communities might be opposed to large-scale development, such as the opposition to 5G telephone poles seen in California, while getting the right permits might also be an issue. Scraping together funding can likewise be problematic, though public-private partnerships have been able to overcome that hurdle in some areas.
The benefits of smart city technology, including insurance implications, can, however, make these projects worth the work.
“Any time you find a way to better predict when, where, and to what extent damage or injury will occur, you can mitigate the ultimate cost of that incident,” said Rickert. “For example, as we look at wildfires and being able to predict how fast the wind is going, the direction that the fire could move in, and using the analytics from past incidents to [conclude] this is the most likely event, you can either evacuate an area or make sure that you change the infrastructure to be more resilient to that type of loss.”
That preparation can lower the cost to businesses, in terms of post-catastrophe disruption, as well as the infrastructure damage that the city experiences, thereby shortening the recovery period.
“That can lessen the rates of insurance, but you also have to then consider the coverages – does the coverage that’s in place now, especially from a property standpoint, address the type of equipment, the damage that can occur to the equipment, the value of the equipment, and the replacement of it? Do the forms address that, and does the rate structure address that?” said Rickert.
“Those are things that, right now, the industry is working on [determining] with their customers – what are their expectations of coverage, examining policies to determine whether they meet those needs, where there may need to be enhancements or expansion of coverage, and where there may need to be limitations or exclusion of coverage based on that conversation between the consumer and the carrier.”
