WO2025107065A1 - Systems and methods for providing current and future climate change insurance ratings for purchasers of real estate - Google Patents

Abstract

Methods for calculating an insurance rating to determine whether or not to insure a real estate property, the cost of such insurance, and any exclusions to an insurance policy, and methods for providing such rating to potential purchasers of such real estate property.

Description

SYSTEMS AND METHODS FOR PROVIDING CURRENT AND FUTURE CLIMATE CHANGE INSURANCE RATINGS FOR PURCHASERS OF REAL ESTATE

TECHNICAL FIELD

[0001] The following relates generally to systems and methods for developing forwardlooking climate change insurance ratings, including climate impact scores, to be referenced by purchasers as part of the purchase and insurance of real estate.

BACKGROUND

[0002] Multiple factors are taken into account by insurers in arriving at a price at which to offer insurance on real estate. Among these factors are environmental factors, such as a risk of catastrophe (flood, earthquake, sewer back up, etc.), climate, number of claims on the previous house, access to the property, and proximity to emergency services. As the likelihood of an environmental issue leading to a claim increases, so, too, may the cost to insure the property. Indeed, some environmental factors may develop into a high risk that encourages insurers to offer insurance for a property at a cost-effective premium. In other scenarios, a high risk for a particular type of environmental impact may result in such environmental impact being excluded from an insurance policy by the insurer. Climate change-related risks exist today and are anticipated to increase over time. An insurance company’s data and analysis may allow it to estimate the current and future climate change- related insurance risks.

[0003] It is often the case that insurance is not taken into account by purchasers when purchasing a home. If prospective purchasers are presented with insurance information at all prior to making a purchase, it may be an ancillary factor in making a purchasing decision. In such cases, it may be only after the purchase is made and insurance is being secured prior to closing the transaction, that the purchaser appreciates that insurance may be more expensive than expected, subject to significant exclusions, or altogether unavailable. Furthermore, insurance considerations aside, sometimes high-risk environmental factors that would render a property less attractive to a prospective purchaser are not considered by the purchaser because they are simply unaware that such factors exist in regards to the property being considered.

[0004] Some insurers have considerable information based on their long history of insuring properties. In many cases, insurers can draw on historical records of claims on individual properties that they have insured in the past, and on nearby properties that they have insured in the past, to determine the likelihood of different environmental factors impacting on the insurance quote that would be provided in order to insure any given property.

[0005] Due to global warming and other factors, the Earth’s climate is changing, and this climate change is projected to continue in the future. As the effects of climate change are felt around the world, such change can lead to increased risk of environmental events that could lead to insurance claims. Understanding these increased risks, and attempting to predict them, may be advantageous for prospective property owners, and for insurance providers.

[0006] It would be advantageous for prospective purchasers of real estate to be able to understand the current and future impact that environmental factors may have on ability and cost to obtain insurance on their potential purchase, and on their enjoyment of the property in general. With that information in hand prior to making a purchase decision, the purchaser may be able to use the information to help determine their interest level in the property, and an appropriate purchase price. In some cases, the purchaser may differentiate between properties based on the current and future climate risk score. This action would allow an insurer’s customers to select lower overall risk properties (which would in turn reduce the risk exposure for both the purchaser and the insurance company).

[0007] It may also be advantageous for insurers to make this information available to purchasers, since it may reduce the value of potential claims that the insurer must pay and may also improve overall satisfaction for clients of the insurer.

SUMMARY

[0008] In one broad aspect of the invention, there is provided a method for calculating a simplified, current and future climate change-related rating reflecting environmental and non- environmental factors that may impact on insurance coverage of the property; the history of events regarding each such environmental and non-environmental factor for the property; the significance of each environmental and non-environmental factor and the potential loss associated with each; and then using that combined history and weight of each environmental and non-environmental factor to arrive at simplified current and future climate change-related insurance rating.

[0009] In another broad aspect of the invention, there is provided a method for calculating an insurance rating to determine whether or not to insure a real estate property, the cost of such insurance, and any exclusions to an insurance policy comprising: identifying environmental and non-environmental factors that may impact on insurance coverage of the property; assessing the history of events regarding each such environmental and non- environmental factor for the property; weighing the significance of each environmental and non-environmental factor and the potential loss associated with each; and using the combined history and weight of each environmental and non-environmental factor to arrive at the insurance rating.

[0010] In another broad aspect of the invention, there is provided a method for calculating an insurance rating to determine whether or not to insure a real estate property, the cost of such insurance, and any exclusions to an insurance policy comprising: identifying environmental and non-environmental factors that may impact on insurance coverage of the property; assessing the history of events regarding each such environmental and non- environmental factor for the property; considering future environmental risk factors based on future climate change models to predict the existence and degree of elevated risk in the future; weighing the significance of each environmental and non-environmental factor and the potential loss associated with each; and using the combined history, predicted future risk and weight of each environmental and non-environmental factor to arrive at the insurance rating.

[0011] In another broad aspect of the invention, there is described a method above, wherein the insurance rating is provided to a prospective purchaser of the real estate property prior to the prospective purchaser deciding to purchase the real estate property.

[0012] In another broad aspect of the invention, there is described a method above, wherein the insurance rating is provided to the prospective purchaser through a software application.

[0013] In another broad aspect of the invention, there is described a method above, wherein the insurance rating is provided to the prospective purchaser through a website.

[0014] In another broad aspect of the invention, there is described a method above, wherein the insurance rating is provided to the prospective purchaser as a range of probabilities.

[0015] In another broad aspect of the invention, there is described a method above, wherein an insurance quote is provided along with the insurance rating.

[0016] In another broad aspect of the invention, there is described a method above, wherein the insurance rating is provided to the prospective purchaser using a visual metaphor (i.e. traffic light, gauge, or other visual indicator). BRIEF DESCRIPTION OF THE DRAWINGS

[0017] Embodiments will now be described by way of example only with reference to the appended drawings wherein:

[0018] Figure 1 is an exemplary depiction of a mobile device displaying an insurance rating score and other factors as part of a website or software application;

[0019] Figure 2a is an exemplary depiction of a mobile device displaying a real estate listing page with insurance risk rating information integrated therewith; and

[0020] Figure 2b is an exemplary depiction of a mobile device displaying further details regarding the insurance risk rating information presented on the mobile device screen depicted in Figure 2a.

DETAILED DESCRIPTION OF THE INVENTION

[0021] The invention disclosed herein describes systems and methods for providing a climate impact score for purchasers of real estate.

[0022] When assessing whether or not, and at what rate, to insure real estate, insurers will use many factors in reaching this decision. Some of these factors are environmental factors, such as, by way of example only, risk of flood, risk of earthquake, risk of hail damage, risk of drought, and risk of high winds. Other factors related to environment such as theft, accessibility of property to emergency services, sewer back up, and history of past claims also may be taken into account.

[0023] Insurers with a large client base and/or a long history of providing insurance will generally have records of insurance for specific properties and nearby properties which will allow them to arrive at a quote for insurance on a property, and a policy, that are informed by a variety of factors, both environmental and non-environmental. This information is often not at the forefront of purchasers’ minds when contemplating a real estate purchase.

[0024] One embodiment of the invention is a method for determining a climate impact score for any given property based on a variety of environmental factors. This climate impact score may be based on various environmental factors including, without limitation, flood risk, earthquake risk, tornado risk, hail risk, high wind risk, freezing rain risk, extreme heat risk, extreme cold risk, hurricane risk, cyclone risk, overland flooding risk, heavy rain risk, drought risk, wildfire risk, pollution risk, radiation risk, climate change risk, pesticide risk, soil erosion risk, sewer back up risk, dust storm risk and wildlife risk. The foregoing list of environmental factors is provided by way of example only, and it will be appreciated that other environmental factors may also be relevant in reaching a decision regarding the cost to insure real estate, and whether to insure the real estate at all. In some cases, environmental factors may inform the insurer as to whether to exclude certain scenarios or types of claims from insurance being offered on a property.

[0025] It will be appreciated that the insurer may assess these risks by considering historical information, such as, for example, history of environmental events (floods, hurricanes, etc.), but also by having recourse to claim history in the insurer’s records. These events and claim histories could be with respect to specific properties, and also with respect to nearby properties.

[0026] The various risk factors can be considered together, given different weightings depending on likelihood and severity of property damage, and used by the insurer to make decisions with respect to insuring a property.

[0027] In one embodiment, an artificial intelligence (Al)/machine learning model could be used to take different risk factors for a property and translate them into an estimate of loss based on actuarial/underwriting techniques. The risk score could be represented as an index, for example. In one embodiment, the index could be represented as a number, or a series of numbers. By way of example only, the number could be a number between 0 and 1000 with 1000 representing maximum risk, 500 representing typical risk, and 0 representing minimum risk. In such an example, the risk scores could be distributed around the mean/typical risk number of 500. Outlier result +/- 1 or +/- 2 standard deviations from the mean would be accentuated in the results.

[0028] While the above discusses historical risks, it will also be appreciated that the information considered by insurers could also extend to predicting future risk as well. With the Earth’s climate changing due to factors such as global warming, this climate change brings with it changes in environmental risk factors as well. By assessing historical insurance information, and current and predicted climate change trends, an embodiment of this invention includes attempting to predict future environmental-related insurance risks, and providing such information to prospective real estate purchasers. Such predictions may be based on publicly available data or proprietary or confidential data, for example. For example, some government entities or universities may publish or make available the results of future modeling, or data related to expected environmental, geological, or other trends.

Other data may be privately held, or may be available for purchase.

[0029] By way of example, insurers may be able to extrapolate climate change data to predict wildfire risk in the foreseeable future. In that example, if there is a risk of substantial rising of overall temperatures and a reduction in rainfall levels overtime, this may heavily impact on the risk that a property could suffer a total loss due to wildfire in the near future.

[0030] As another example, future climate change may also lead to increased rainfall or increased intensity of storms, which could increase risk of floods and damage from overland flooding, heavy winds, tornadoes or hail.

[0031] As another example, if a geographic region has historically experienced elevated risk for a particular type of event (such as earthquake risk), and a large catastrophic event has not happened during the expected event frequency (for example, if it’s been more than 110 years since the last “once in 100 year” earthquake) then properties in such regions may have an increased risk of earthquake damage.

[0032] It will be appreciated that these future risks may be expected to vary depending on the geographic location of the real estate property being insured. For example, an increase in the number and/or severity of hurricanes may be more likely to pose risks for properties in a region with a history of hurricanes (for example, near oceans), as opposed to properties that are more inland. These trends in environmental risk, and the relevance of such trends depending on the location of the property in question, may be useful information both to insurance companies and to prospective purchasers of real estate.

[0033] It will be appreciated that different risk factors may be given different weight, depending on various factors, such as the geographic location of the property to be insured. For example, while the risk of rainfall may be higher in a rural location that an urban location, the related risk of flooding due to rainfall may be higher in the urban location because of poor drainage or higher risk topography in the urban location. Similarly, a risk of drought and/or extreme heat may be higher in an urban location that a rural location, while the related risk of wildfire is higher in the rural location because of the lack of vegetation in the urban location.

[0034] An advantage of this embodiment of the invention is the forward-looking nature of the assessment of climate change risk. This future information and predicted insurance risk can be used to inform present-day buying decisions. A property may be relatively low risk in the present from an environmental risk perspective, but climate change modeling and other future risk modelling going forward may predict increasing environmental risk such that present and/or future insurance rates will be higher and/or insurance policies will contain exclusions. This information regarding future risk may be important for prospective purchasers of the property in the present, as they may understandably wish to avoid owning a property that is vulnerable to these future increased environmental risks, as well as the accompanying higher cost insurance and/or insurance policy exclusions.

[0035] As an example, climate change modelling may show that erosion along certain shorelines is increasing and is predicted to continue to increase as the effects of climate change intensify. As such, while a property on the shoreline may be at relatively low risk for flooding today, that risk could be extremely high in 10 to 20 years as climate change increases. This is information that could be critical for an owner of that property in terms of the insurance they can expect to pay, and in terms of whether or not the property will be usable in the somewhat near future. It will be appreciated that this information is important to property owners, prospective property buyers and insurance companies, among others.

[0036] If historical data shows a recent increasing trend in storm activity or theft activity in an area, this could be extrapolated into the future to inform insurance rates if those increases in such activities continue. In some embodiments, this information could be extrapolated for the foreseeable term of the insurance term.

[0037] In one embodiment, the information used by the insurer can be provided in the form of a simple score, such as a number. It will also be appreciated that the information can be provided in other forms as well, such as, for example, by letter grade, in writing, and visually using icons. It will also be appreciated that the information used by the insurer can be provided in considerably more detail, if desirable to the insurer or the customer.

[0038] In one embodiment, the information can be provided separately for both future risk and present-day risk. In other embodiments, the information can be provided for either future risk or present risk. In other embodiments, the information can be provided as a blend of both future risk and present risk.

[0039] The information could be provided by a website or software application, but could also be provided in physical form, such as in a flyer or as part of a real estate listing sheet made available at showings of the real estate. The information could also be presented as part of a third party listing, for example on a website that features all real estate listings. In one embodiment, the information may only be made available to customers of the insurer that generates the rating information. In other embodiments, the information may be made generally available to all members of the general public.

[0040] It will be appreciated that by making this information available to prospective purchasers prior to making a decision to purchase a property, purchasers can use the information to determine whether they wish to purchase a property, and if so, what price they are willing to pay. Traditionally, where purchasers do not have this information as part of the purchasing decision, they may decide to make a purchase that they otherwise would not have made, or to pay more for a purchase than they otherwise would have. Thus, providing this information is advantageous to potential purchasers.

[0041] It also may be advantageous to insurers for prospective purchasers to have this information. It may increase customer satisfaction that the customer has this information readily available. It also may be preferable to the insurer if an asset sells for a lower amount due to identified risk factors, since the property can therefore be insured as a less valuable asset. Providing such information may also drive engagement for customers of the insurer providing the information, and may drive growth for insurers as prospective purchasers are motivated to engage with the insurer providing such information, and optionally providing quotes for insurance along with such information.

[0042] Figure 1 is a representation of a mobile device 100 displaying environmental information regarding insurance either through a website or a software application. As shown in Figure 1 , the information could be presented by way of a score 101 (in this case a score of 81 out of 100). The information could also, or alternatively, be shown by way of a range and with colours, as shown by a dashboard meter representation 102, optionally featuring colours. Further visual representations could also be used, such as check marks 103 and crosses 104 alongside visual representations depicting various types of environmental risk factors such as earthquakes 105, flooding 106, and inclement weather 107.

[0043] While Figure 1 shows an example of how this information may be presented, it will be appreciated that the information could be presented in a variety of different visual representations, such as other icons, different scoring formats, animations, videos and other presentation methods. It will be appreciated that differing levels of detail could be provided. [0044] Figures 2a and 2b show representations of two sequential displays of a mobile device 110. Figure 2a depicts a representation of a typical real estate listing page (in this case, based on realtor.ca®, with certain information redacted) with proposed integration of information from the present invention, including a current risk score 111 and a future risk score (10+ years) 112. By clicking on a link to more information 113 (in this case, a “Learn More” link), the user may be brought to a further display, depicted in Figure 2b, showing detailed scores separated out by risk factor. For example, 114 shows rainfall risk, 115 shows fire risk, 116 shows extreme heat risk, and 117 shows flood risk. It will be appreciated that these can be shown by graphical representation, icons, numerical scores, or any combination of the foregoing. In some embodiments, such displays are customizable by the user, such that the user can choose, for example, which risk factors are displayed, which icons are used, and the scoring range employed. In the example in Figure 2b, the rainfall risk is depicted by an icon 114a, and is also represented by a score depicted in a meter format 114b.

[0045] Further, in some embodiments, the user could be provided with the option to filter scores to allow for different risk factors to be highlighted.

[0046] The information could also be presented aurally, by way of recording or computer-generated voice. It could also be provided orally during the purchase making decisions by a sales representative, real estate agent or insurance representative.

[0047] In some embodiments, the information is provided for a specific property when a prospective purchaser is reviewing the listing. In other embodiments, the information may be available and searchable for any property, whether or not the real estate is currently for sale or rent. In some embodiments, the rating information described herein could also be provided to the prospective purchaser along with a quote offer from the insurer providing the rating information.

[0048] In some embodiments, the information could be presented by way of one or more maps, which may or may not be searchable. Users could reference such maps to determine areas of relatively higher or lower risk, and may use this information in deciding where they may wish to purchase real estate. This could be presented either over a small geographic area, such as an area of a few blocks, or a few square kilometers, or over a larger geographic area, such as at the provincial, state, county or country level. In one embodiment, users could use filters on maps to assess the level of risk for a particular type or types of environmental factor. By way of example only, users could access a map showing risk of earthquake for a particular province or state, or perhaps for a smaller area within a province or state, such as a city or town, or a smaller area, such as a neighbourhood within a city or town.

[0049] It will be appreciated by those of skill in the art that non-environmental factors may also be taken into consideration by insurers when determining whether or not to insure a property, and the price of such insurance. Such non-environmental factors could also be included in the above score, or as a separate score and provided to prospective purchasers of real estate as part of the real estate buying process. Such non-environmental factors may include, for example, the number of renovation permits issued on a property, the number of previous owners of a property, and a history of non-environmental-related claims.

[0050] The environmental and non-environmental information can be used by potential purchasers of real estate to inform decisions on their purchase. It will be appreciated that the information can be provided regarding a specific property, but that an alternative is that information can be provided as a probability. By way of example, information could be provided that a property has a certain probability that a certain type of event or claim will be excluded. This exclusion decision would then be communicated to the prospective buyer prior to finalizing the insurance coverage.

[0051] Numerous specific details are set forth in order to provide a thorough understanding of the examples described herein. However, it will be understood by those of ordinary skill in the art that the examples described herein may be practiced without these specific details. In other instances, well-known methods, procedures and components have not been described in detail so as not to obscure the examples described herein. Also, the description is not to be considered as limiting the scope of the examples described herein.

[0052] It will be appreciated that the examples used herein are for illustrative purposes only. Different terminology can be used without departing from the principles expressed herein.

[0053] Although the above principles have been described with reference to certain specific examples, various modifications thereof will be apparent to those skilled in the art as outlined in the appended claims.

Claims

Claims:

1 . A method for calculating an insurance rating to determine whether or not to insure a real estate property, the cost of such insurance, and any exclusions to an insurance policy, comprising: a) identifying environmental and non-environmental factors that may impact on insurance coverage of the property; b) assessing the history of events regarding each such environmental and non- environmental factor for the property; c) weighing the significance of each environmental and non-environmental factor and the potential loss associated with each; and d) using the combined history and weight of each environmental and non- environmental factor to arrive at the insurance rating.

2. The method of claim 1 , wherein the insurance rating is provided to a prospective purchaser of the real estate property prior to the prospective purchaser deciding to purchase the real estate property.

3. The method of claim 2, wherein the insurance rating is provided to the prospective purchaser through a software application.

4. The method of claim 2, wherein the insurance rating is provided to the prospective purchaser through a website.

5. The method of any one of claims 1 to 4, wherein the insurance rating is provided to the prospective purchaser as a range of probabilities.

6. The method of any one of claims 1 to 5, wherein an insurance quote is provided along with the insurance rating.

7. A method for calculating an insurance rating to determine whether or not to insure a real estate property, the cost of such insurance, and any exclusions to an insurance policy comprising: a) identifying environmental and non-environmental factors that may impact on insurance coverage of the property; b) assessing the history of events regarding each such environmental and non- environmental factor for the property; c) considering future environmental risk factors based on future climate change models to predict the existence and degree of elevated risk in the future; d) weighing the significance of each environmental and non-environmental factor and the potential loss associated with each; and e) using the combined history, predicted future risk and weight of each environmental and non-environmental factor to arrive at the insurance rating.

8. The method of claim 7, wherein the insurance rating is provided to a prospective purchaser of the real estate property prior to the prospective purchaser deciding to purchase the real estate property.

9. The method of claim 8, wherein the insurance rating is provided to the prospective purchaser through a software application.

10. The method of claim 8, wherein the insurance rating is provided to the prospective purchaser through a website.

11 . The method of any one of claims 7 to 10, wherein the insurance rating is provided to the prospective purchaser as a range of probabilities.

12. The method of any one of claims 7 to 11 , wherein an insurance quote is provided along with the insurance rating.

13. A method for calculating a simplified, current and future climate change-related insurance rating comprising: a) identifying environmental and non-environmental factors that may impact on insurance coverage of the property; b) assessing the history of events regarding each such environmental and non- environmental factor for the property; c) weighing the significance of each environmental and non-environmental factor and the potential loss associated with each; and d) using that combined history and weight of each environmental and non- environmental factor to arrive at the simplified, current and future climate change-related insurance rating.

14. The method of claim 13, wherein the insurance rating is provided to a prospective purchaser of the real estate property prior to the prospective purchaser deciding to purchase the real estate property.

15. The method of claim 14, wherein the insurance rating is provided to the prospective purchaser through a software application.

16. The method of claim 14, wherein the insurance rating is provided to the prospective purchaser through a website.

17. The method of any one of claims 13 to 16, wherein the insurance rating is provided to the prospective purchaser as a range of probabilities.

18. The method of any one of claims 13 to 17, wherein an insurance quote is provided along with the insurance rating.