Insurers Turn to AI Models to Tackle Rising Losses from Extreme Weather

As extreme weather events drive mounting losses, insurers are increasingly turning to AI-driven risk assessment tools. A survey by ZestyAI of 200 senior insurance leaders shows one in four insurers using AI models for convective storms and 18% for wildfires. Stochastic models remain the preferred tool for storms, while traditional actuarial models dominate wildfire risk assessments.

Despite varying views on accuracy, 73% of respondents see AI as crucial for managing climate-related losses. Adoption within the industry, trusted peers, and cost are the top factors influencing the selection of predictive models, while regulatory approval and transparency rank lower.

The survey also highlights the competitive advantage of AI, with 81% of insurers using AI models believing they are ahead in addressing climate challenges. Transparency in risk models is critical, with 90% calling for improved communication with policyholders on risk mitigation.

ZestyAI CEO Attila Toth emphasized AI’s transformative potential, citing its role in enabling profitable growth and better protection for policyholders amid increasingly complex weather patterns.