A new survey from ZestyAI, a provider of climate and property risk analytics powered by artificial intelligence (AI), has revealed shift in how insurance companies are managing the growing threat of extreme weather events.
According to the survey of 200 senior property and casualty (P&C) insurance executives, one in four insurers are now using AI to help assess the risks associated with severe storms. The adoption of AI risk models is also expanding in wildfire assessments, with 18% of insurers incorporating AI into their risk evaluation for wildfires.
The research highlighted a strong belief within the insurance industry that AI will be instrumental in managing climate-related losses. Seventy-three percent of executives surveyed agree that AI models are crucial for addressing the increasing frequency and severity of weather events exacerbated by climate change.
Despite the growing use of AI, the industry remains divided on the most effective risk models. Traditional actuarial models, based on historical data, are still favoured by 54% of respondents for assessing wildfire risks.
For severe convective storms, stochastic models—those that simulate a range of possible outcomes based on random variables—are preferred by 45%. While only 20% of executives view AI and machine learning models as the most accurate, 27% believe that a combination of different modelling approaches offers the best predictions for managing risk.
The survey also noted that the cost of extreme weather events is rising. Insured losses from severe storms in the US surged from $30 billion in 2022 to more than $50 billion in 2023. As a result, many insurance executives are prioritizing practical risk management strategies, such as manual inspections, deductible strategies, and actual cash value (ACV) roof endorsements. Non-renewals are only prioritized by 32% of the insurers surveyed.
For insurers selecting AI-powered risk models, industry adoption is the most important factor, with 45% ranking it as a top consideration. Adoption by trusted peers (40%) and price (37%) also ranked highly, while regulatory approval and model transparency were less critical to decision-making.
The survey revealed a growing consensus among insurance executives that AI has a crucial role to play in the industry’s future. Eighty percent of respondents believe that AI is unlocking new opportunities for profitable growth, and 73% agree that carriers who adopt AI will outperform those that do not.
Of those insurers who have already integrated AI risk models, 81% report that they are ahead of competitors in adapting to the challenges posed by climate change. This figure drops to 66% among those still using traditional risk assessment models.
Attila Toth, Founder and CEO of ZestyAI, emphasized the transformative potential of AI in the insurance sector. “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,” Toth said.
“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.”
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