Alien abduction insurance, hole-in-one coverage for a golfer, and zombie apocalypse protection. Which one is a real insurance policy? Insurance specialist Jaclyn de Medicci Bruneau says all of them.
“Even though some may be tongue in cheek, the reason I like sharing this isn’t just for a laugh; it actually makes a serious point. Insurance is remarkably flexible,” Bruneau told attendees at a meeting of the Southeast Alaska Landslide Information Preparedness Partnership (SLIPP) on July 30. “If there’s a way to measure a risk and price it, there’s usually a way to build a policy around it, no matter how unusual it sounds.”
Landslides, however, are not so unusual in Southeast Alaska. In just over a decade, the region has seen four fatal landslides. Still, insuring against them is a challenge.
It’s a problem that the folks with SLIPP– a group dedicated to reducing the risk of landslides in the region– is all too familiar with. At its July meeting, the coalition heard from Bruneau, a longtime insurance regulator who now works for the sustainability nonprofit Ceres, about insurance options for the region.
A traditional homeowners insurance policy usually protects a home’s structure from windstorms and hail, to vandalism and water damage. But there are often exclusions in the policies.
“Some of these exclusions make intuitive sense. You know, wear and tear, pest infestation. Those are maintenance issues, not, you know, accidents,” Bruneau said. “Insurance was never designed to cover those type of things. But flood, earthquake, and landslide are different. These are catastrophic risks that tend to hit an entire region at once, and insurers manage that kind of correlated risk very differently from, say, an isolated house fire.”
When it came to the slides in Sitka, Haines, Wrangell and Ketchikan, Bruneau said homeowners’ insurance exclusions forced many affected families to rely on the federal government after they were displaced.
“Every one of those families may have had a standard homeowner’s policy, but all of those policies excluded landslide damage. Recovery instead depended on a federal disaster declaration, and you know after Wrangell, that declaration took months to arrive,” Bruneau said. “Even the main federal program that funds landslide hazard monitoring has lapsed with reauthorization still pending, so that safety net isn’t guaranteed to be there either.”
Bruneau said the exclusions are not an unsolvable problem, though. “Parametric insurance” may be one of the answers. Unlike traditional insurance, where you file a claim for damages after-the-fact, with parametric insurance, the payout is agreed upon ahead of time.
“Everyone agrees up front on a measurable trigger, something like a certain amount of rainfall in a certain amount of time,” Bruneau said. “Once that trigger is crossed or met, payment goes out automatically, often within days or even hours.”
Parametric insurance doesn’t exist for slides in Southeast…yet. But Bruneau thinks it could. It works in three steps- first a parameter is set- like a certain magnitude of earthquake or a level of rainfall, or a temperature. That parameter is monitored continuously. Once it crosses the agreed upon threshold, the payment is triggered. In Cancun, the government used parametric insurance to protect its tourism economy and reef from high winds. And, Bruneau said, in the first pilot season of a program in India, 21,000 women’s wages were quickly covered by parametric insurance when high heat exceeded a pre-agreed-upon temperature threshold, making it unsafe for the women to work.
“That’s kind of the brilliance of it,” Bruneau said. “There is so much flexibility within the structure of parametric itself that, you know, it can be built to look like what you want it to look like, or cover what you want it to cover.”
She said it does not replace traditional coverage or close all the gaps, but it can offer some protection where other insurance can’t, and with less red tape.
Bruneau spoke for about 30 minutes before she took a few questions from the audience. Mike Janes, an avalanche forecaster, asked if the weather stations used to confirm “triggers” in any of the pilot programs had to meet certain standards.
“Not all weather stations are created equal in measuring precipitation,” he said. “I was curious if you could speak to what does it take to get these weather stations to be able to to make a trigger like this that’s reliable and useful?”
Bruneau said there aren’t any mandated requirements at this time, and the insurance carrier and the customers can work together to determine the best way to measure that data. It’s flexible because the parametric insurance market is an emerging space.
“I know in one case, I forget which state, but it was a parametric flood product for homeowners, and they actually went and installed sensors in each of the homeowners’ yards,” she said. “So there are different ways, you know, to get at that. There’s no set standardization quite yet for that.”
Bruneau said she was not aware of any emerging pilot programs for parametric insurance in Alaska yet, but encouraged SLIPP to push and ask. In places where pilots have been successful, groups have worked with local governments, philanthropic organizations and NGOs to make the ‘parameters’ possible.
