The Weekly Wrapup is an analysis of the week's insurance tech news from the editors of Digital Insurance.

Insurers are “going digital” at a breakneck pace, attempting to keep up with rapidly evolving customer expectations and capitalize on new opportunities. But along the way, carriers are also learning about emerging externalities that will impact the next generation of their business.

Global warming is driving a subsequent rise of extreme weather events that could increase insurance companies’ claims -- potentially so far as to make some assets too risky to underwrite new policies in particular locations, according to Bloomberg. The number of natural disasters, including hurricanes in the Atlantic Ocean and wildfires in California, increased in 2017. In addressing the World Economic Forum’s annual meeting in Davos, Switzerland, this week, AXA CEO Thomas Buberl said that his company fears that property in some of the world’s major cities will become “uninsurable” within the next decade as rising ocean levels deluge coasts.

“At a scenario between 3 and 4 degrees [warmer] … your basement shop in New York, your basement shop in Mumbai will at this point not be insurable anymore,” he said, Bloomberg relates, referring to metropolitan areas that are each home to more than 20 million people and their businesses.

AXA is able to assert all this thanks to its advanced modeling and data collection that it uses to fuel all sorts of initiatives. The next step for the company – and the industry – is how to leverage that data and technology and find a way to design new products that reflect the changing risk profile of the world.

Specifically, AXA has been a leader in using digital technology to reach underserved populations and prevent ruin in emerging economies. But the change in Earth itself doesn’t stop at countries’ borders. It’s likely that many of those precepts – especially things like parametric insurance, which pays out automatically after a triggering event – will have to be adapted to serve mature economies, potentially very soon.

Bad behavioral trends

While climate issues present a foreboding future for insurers of all kinds, a smaller-scale – but still concerning – crisis is facing the gigantic personal auto line of business.

In the U.S., total miles driven are on the rise, which traditionally increases the amount of claims that insurers face. But compounding the trend is drivers’ increasing distraction behind the wheel. There were 34,439 fatal car crashes in 2016, the most since 2007 – but with 4,000 fewer cars on the road, according to the Insurance Institute for Highway Safety.

The same digital technology that is shaking up insurers’ customer-facing strategies is also impacting the bottom line as it causes more accidents. Further, as digital gets increasingly embedded in the vehicle itself, the costs to repair cars goes up. Matt Moore, SVP of the IIHS’s Highway Loss Data Institute, told USA Today this week that embedded car technology increases the cost of a claim by about 2%.

It’s a recipe for bottom-line pressure for many prominent companies, and this week, we saw some in the industry look to take this on by leveraging their existing usage-based insurance programs to detect distraction and attempt to wean customers off the habit. But these programs are still in their infancy – and there’s always the question of whether or not cars will even have drivers to get distracted down the road as well.

The shifting ground beneath insurers’ feet is the new normal. Getting and interpreting data to identify what trends actually mean is more crucial to carriers’ survival than ever.

This article contains reporting from Bloomberg News.

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