UK motoring organisation The Automobile Association (AA) has seen a 23% jump in claims coming in to its insurance call centre due to the UK’s continuing icy and snowy spell of weather. Almost one third of all the motor claims logged with the AA’s insurer were related to snow and ice during this period.
This leads us to think that motor insurers need to take out weather risk cover. Of course motor insurers will have reinsurance cover to back up their losses from claims but wouldn’t it be better if they had a proactive form of weather cover which was triggered by temperature changes?
In this case the weather in the UK has been considerably colder than normal. You would think that an organisation like the AA could find the correlation between cold weather and claims and with the help of their reinsurers come up with a policy which pays out to them when the temperature is below a certain index point.
Every year we hear multiple reports from many industries of increased claims or loss of business due to weather extremes and in the majority of cases these could be hedged against through prudent use of weather risk management and alternative risk transfer techniques.
We expect to see innovative insurers bring out more weather risk products to help businesses cope with the impact of colder than normal winter weather in the coming years.