We have been working intensively on this for a year, conducting an information campaign on our "Climateof Risk" report at the Polish Chamber of Insurance. Here is our case study.
In our communication we emphasise that appropriate risk management is a precondition for insurability. We try to make the public aware of the fact that without spatial planning, use of more wind-resistant technologies, water retention and flood infrastructure, costs of floods, drought and hurricanes will be higher and higher. It is not possible to shift all losses to the insurance market, because in such a case policies become very expensive, the demand barrier appears here, and clients do not accept the premium amount.
For this reason we started work on the "Climate of Risk" report, which we prepared together with Deloitte Poland. The report's launch in December 2018 coincided with the international climate conference COP held in Katowice. Thanks to it, on that occasion we managed to start a dialogue with various environmental organisations and important government partners. The report was prepared under patronage of the Ministry of the Environment. Preparing it, we cooperated with the Government Security Centre and scientific circles.
According to forecasts, by 2030 the world's population will increase by 1 billion. The property which may be potentially destroyed - i.e. assets of homes, companies and the public sector - is also on the rise. In the report, we illustrated the growth of those assets by means of the size of built-up areas.
Urbanisation is mainly visible in the cities, which have crucial influence on the safety of people, environment, resources and urban infrastructure. This is due to the fact that a big part of the economy's and private assets, as well as human capital is concentrated there.
Over the last decade the average annual number of natural disasters, as well as financial and human losses has increased as compared to the average from the last 30 years. Consequently, risk exposure is on the rise.
In order to determine the exposure trends in Poland, we had to estimate the broadly-understood property. Poland's total wealth can be estimated at approx. PLN 22.5 trillion. Its dominant component is human capital - approx. PLN 16.3 trillion (73%).
Over the last two decades, the value of produced capital, comprising assets of households, businesses, municipal assets and those controlled by the State Treasury, has increased almost twofold. Produced capital has increased as a result of investments made by businesses and the public sector, including investments subsidised with EU funds. Property in Poland which now requires protection against fire, flood or violent wind is worth PLN 2,2 trillion more than in 1995.
Risk exposure is highly spatially diversified. It is the biggest in cities - Warsaw, Cracow, Tri-city.
What also differs significantly in geographic terms is socioeconomic sensitivity - however, in this case urban regions rank low. Regions in which residents' income is the lowest, and the quality of public services or infrastructure the worst are the most sensitive.
In the report, we have also indicated the places which are the most important from the risk management point of view - namely those where, at the same time, risk exposure is big and socioeconomic sensitivity is high. Costs of disasters in such places with be the biggest, whereas loss adjustment and reconstruction may be more difficult than elsewhere.
Apart from the climate change, other changes, in particular, social, demographic, economic or technological ones, take place simultaneously. As is the case with other countries, the individual regions do not develop evenly. In fact, we have a number of centres (e.g. Warsaw) where the population is on the rise, whereas in other cities it decreases. What also changes dynamically is the structure of companies. Consequently, we observe two trends: increased exposure and bigger concentration of property which accompanies it.
Over the last dozen or so years Poland has been lucky, as natural disasters took place in sparsely populated agricultural or forest areas, yet losses were significant. If a natural disaster hit a big city, in particular Warsaw, its influence on the dynamics of the domestic product would be definitely negative.
Mapping of the areas which are most at risk and property estimates gave us material which allowed conducting a number of simulations. On the other hand, the simulations constituted perfect material for communication and education - for instance, through media.
The three flood waves in 2010 resulted in 24,000 affected families in 14 provinces.
Losses resulting from flooded houses and flats may be estimated at PLN 1.9 billion (losses in movables and costs of refurbishment). If the same flood had occurred last year, it would have cost as much as PLN 16.2 billion. It is 20.9% more than in 2010.
The flood risk is on the rise, and what contributes to it is the changing climate and way in which land is used, which decreases its water retentions, development of urban and suburban areas, extension of transport infrastructure, deforestation and marsh desiccation.
At the same time, the exposure resulting from the economic growth is on the rise - the value of the real properties located on floodplains increases, as well as investments on floodplains and migrations are on the rise - new residential buildings, assets in companies, movables, municipal assets. Productivity of arable land and other agricultural areas increases. Protection structures, such as floodbanks, may give a false sense of safety, and encourage even more intensive development of floodplains.
Consequently, additional preventive measures need to be taken. Our simulation helped demonstrate it in a simple way.
Longer and longer heatwaves increase demand for electricity, and, on the other hand, a low water level in rivers makes it difficult to cool power stations, so it is necessary to reduce their power. We showed how much an eight-hour break in the work of a power station could cost - as much as the losses caused by the drought in the very dry 2018. The blackout would affect residents, but it would also lead to huge losses in numerous branches of the economy.
The data from that simulation also allowed us to conduct an awareness-raising campaign in this area - together with science influencers we showed how it can affect each of us, and what types of insurance will help residents in such a situation.
We have to remember that the consequences of disasters impact not only direct partners of companies but also their suppliers and subcontractors, i.e. further participants of the supply chain. When estimating the risk, we need to take into account indirect damage - and risk estimation is conducted today with consideration given to events which concern the whole world.
Using the example of the 2018 drought, we demonstrated its influence on the agricultural sector and other branches of the economy. The total cost of the 2018 flood for the Polish economy amounted to approx. PLN 2.6 billion.
We emphasised importance of preventive and educational measures initiated or supported by the state, as such measures may limit the drought's negative consequences.
Prevention and insurance are activities which complement each other. Investments in safety decrease the likelihood of losses or reduce their value. In certain cases, effective prevention is necessary to make a given risk insurable.
Such measures can be exemplified by a proper structure and type of crops, ensuring an appropriate forestation rate of the areas exposed to the risk of drought, and investments in water infrastructure.
Insurance (weather derivatives) can play a material role in damage liquidation particularly for companies in the food and power industries. The market of weather derivatives is not developed in Poland, however business can choose from among many types of insurance against lost profits (business interaption), with coverage adapts to individual needs.
Drought is a good occasion to say that tasks in climate risk management have to be divided among various entities.
In our report, we indicated insurers' tasks in the natural disaster risk management, as well as the tasks of the state.
The insurers' tasks include gathering risk data, prevention and education (it is also the authorities' task), risk assessment, creating insurance products and effective loss adjustment.
The state should prepare and make available maps showing risks connected with natural disasters, conduct a right spatial development policy, adapt construction norms to threats and strengthen the role of construction supervision services.
We juxtaposed in with the goals resulting from Sendai international agreement, and arrived at a model to follow.
"Climate of Risk" report indicates that there is a need to develop a systematic and uniform approach to collection of statistical data which allow measuring exposure, sensitivity and vulnerability to natural phenomena in the social, economic and structural dimension. We face a great challenge in this respect, as in Poland there are numerous entities responsible for collecting and analysing information about various weather phenomena and their consequences. Data on climate change can be found at the Institute of Meteorology and Water Management, flood risk maps are prepared by Polish Waters, climate's influence on the agricultural sector is studied by the Institute of Agricultural and Food Economics, Institute of Soil Science and Plant Cultivation monitors droughts, and Polish Geological Institute conducts geological research. Some information is available from the local government administration, Statistics Poland (GUS) and rescue services, e.g. fire service units. Not all data can be interpreted, and not all of them are in the digital form.
In addition, there are new sources of data, such as satellites or drones, which may provide us with information even in real time. It is collected and analysed by the Crisis Information Centre of the Polish Academy of Sciences. Satellites and drones are perfect for monitoring of various weather phenomena and natural disasters. Thanks to them, it is easier for us estimate their frequency over the last years, and identify the areas most at risk. Furthermore, drones can be used to assess the initial condition of selected structures or damage incurred, which helps insurers assess the risk and conduct the claim settlement process.
Consequently, there is a lot of difficult, laborious work ahead of us to systematise the knowledge and learn how to cooperate in this respect with a really big number of entities. We already do it. We cooperate with and support the public administration. For instance, in all materials we have prepared we refer to messages of the Government Centre for Security (RCB), and indicate how one should behave upon receiving them. RCB messages in Poland are a system notifying residents about, among other things, weather-related threats.
At the same time, we emphasise in this case the need for better integration of activities and making the information flow between institutions smoother. It is our recommendation.
The analysis we conducted while preparing the report allowed us to develop a set of such recommendations. This is the basis for our dialogue and cooperation with various institutions. Consequently, apart from cooperation in the area of data collection, we call for:
- Prevention of further growth of exposure - in particular, in the areas which are most at risk. We recommend that local risk management plans are developed in cooperation with residents, the business enterprise sector and NGOs. We would like the Polish legislator to analyse the currently applicable regulations as well as other social and economic factors which influence the quality and scope of the spatial development plans in force. We emphasise the need to develop a systematic and uniform approach to data collection. At the same, we would like the state authorities to publish, on a regular basis, reports containing final estimates of losses caused by natural disasters.
- What is an extremely important demand is development of a plan to deal with the risk at the country level which will define, among other things, administration and organisational capacity, as well as technical and financial means available. It will also set out priorities in the area of climate risk management.
- Last but not least, we recommend increasing outlays on information and educational measures. We already are very active in this area.
The research and analyses which helped us prepare the report gave us necessary knowledge to plan further communication and information campaigns. We wanted the elements of the report's content, in various forms, to discuss important theses included in the study with as much insight as possible, and to reach various groups of recipients.
Currently, media are filled with the climate change topic. They usually focus on frightening people. On one hand, it is an opportunity, because viewers are interested, but, on the other hand, a risk, because they can be bored, and it is difficult to reach them with messages about safety. Our messages focus on safety and problem solving. Unfortunately, such messages are still in minority.
In May 2019, the south of Poland experienced extremely harsh weather conditions. The Lublin region saw a tornado, whereas in Lesser Poland water levels went up. In both cases, the market reacted immediately, sending mobile loss adjusters to the injured parties and launching fast claim settlement paths.
We wrote messages about that. And on a blog in the form of a guide we published material on how to cope with a flood risk situation. We advertised that material on FB in the regions at risk, and it was also the basis for communication in media. We received a lot of signals that such guides are needed.
It was food for thought - we browsed the internet and concluded that it is true that there are not many materials about how to behave in the case of a weather threat. And, after all, a big part of preventive measures depend on us. Taking care of the house's or flat's condition, abiding by weather alerts and adapting our activity to them - are actions which we should take actively.
In order to precisely define the groups interested in such guides, in July we conducted a survey which broadened our knowledge of awareness of weather threats in Poland, in the regions which are most at risk.
Using the CAWI+CATI method, we interviewed over 2,000 respondents from Dolnoslaskie, Malopolskie and Podkarpackie provinces, as well as Grudziadz, Inowroclaw and Wloclawek poviats. According to "Climate of Risk" report, they are the regions which are particularly exposed to weather phenomena, or ones in which extreme weather phenomena may be particularly costly in socio-economic terms.
Below there are the main conclusions from our study:
- Savings are not enough to deal with consequences of a weather event - If a weather event destroyed our house or flat, we would not be able to refurbish it or buy a similar property for our savings. It is declared by 80% of the respondents. The situation looks similar in the case of renting new residential premises. For over 60% of the respondents it would be financially impossible. What is more, a similar percentage of the respondents declare that they do not have any savings in case of damage caused by weather. Consequently, one could expect that majority of the respondents will declare that home insurance is the best form of protection against consequences of weather events. However, the survey results show something quite different.
- We rely on family's and state's help; insurers rank third - Most respondents hope to get help from the local authorities or state (54 and 50% respectively). It needs to be pointed out here that the state cannot help in the case of each individual loss. If one's strategy is based only on possible public aid, it may have very bad consequences. 52% of the respondents declare that they would ask the family or friends for help, whereas barely 50% would immediately notify their insurer.
- We are wiser after a loss occurs - It is indicated by the differences between answers provided by the respondents from Lower Silesia and other respondents. In Lower Silesia - affected by the 1997 flood - as many as 82.5 % of the respondents declare that their home insurance policy also includes a flood. For the entire sample, the percentage is 73%. In total, as many as 34% of the respondents agree with the statement that "they don't need insurance against the elements, as there is no such threat in their surroundings". In Lower Silesia, that percentage is much lower - 26%. As many as 37% of the respondents from Lower Silesia believe that their place of residence is dangerous in terms of weather threats. For the entire sample, the percentage is just 23%.
- Everybody should take out insurance. But what does "everybody" mean? - When asked about the reason for not taking out home insurance, people sometimes say "insurance is expensive". 63% of our respondents disagree with that opinion. What is more, nearly 80% believe that "everybody should take out insurance against weather-related disasters". If the situation looks so good, why as many as half of the respondents believe that weather disasters concern everybody except for them? For a simple reason: everybody is not me. Consequently, we do not care for protection, because it seems to us that the threat does not concern us.
We emphasised the following messages:
- abide by weather alerts, react to them. Secure yourself and your property.
- take care of your home's condition all year long
- take out insurance = remember that a good insurance policy has to cover walls and movables, think about additional car insurance (autocasco)
- don't take risk in the case of a danger - look for safe places
- if there are losses, act in a way which will not make them worse, and report them to the insurer as soon as possible.
Our materials were made available by over 50 communes. We repeated mailing to the communes depending on a threat - we sent messages to the communes affected by violent storms or those in which violent weather was forecast. We focused on communication with the communes in the regions which are particularly exposed to climate-related disasters (e.g. Podkarpacie, Lesser Poland), which we examined in the July survey.
In the social media, we targeted materials to places covered by alerts and, first of all, places which we singled out on the basis of the climate report in our study. We also used geotargeting in Google.
In addition, we established cooperation with influencers in order to differentiate materials and make the recipient groups broader.
What was an important element of our campaign - both in the case of the report, and #dontplead project - was to involve agents and insurance companies as communication ambassadors.
To that end, we used closed Facebook groups to which a dozen or so thousand agents belong. We prepared materials in various formats to help the agents distribute them. Importantly, we prepared a questionnaire in which we asked the market how it perceived its clients' awareness of weather-related threats.
The results of that survey confirmed our earlier study. 60% of the agents indicated that maximum half of the clients in their region have insured walls against the elements. Consequently, most agents who took part in the survey indicated that the insurance gap is up to 50%. Nearly 20% of the respondents said that in their region only every fourth person has such a policy.
78% of the agents indicated that less than half of their clients insure audio/video devices. Almost all of them (97%) indicated that less than half of people insure furniture. On the other hand, less than one per cent indicated that such insurance is taken out by over 85% of clients.
As many as 85% of the agents admit that clients would not be able, using their savings, to rebuild the house or buy a flat at a similar price to the one of the flat destroyed in a disaster, if it took place. As few as 22% of the agents believe that clients would be able to rent a flat, if a disaster destroyed their existing one. According to 75% of them, clients would not be able to buy a car of a similar class, if the one they drive was destroyed in a weather-related disaster. More than half of the agents believe that the client would resign from insurance, if the state helped him rebuild the house.
The agents did not say their place of residence is exposed to weather-related disasters. As many as 89% of the agents considered it to be safe. Does it mean that we underestimate the risk ourselves? No, we simply have not had negative experience. Weather has not caused damage to us. However, we are aware of the fact that it is more and more violent and dangerous. Over 60% of the agents did not agree with the statement that climate change does not affect us directly. It is important. Despite lack of personal, negative weather-related experience, numerous agents make clients aware of the growing risk.
At the beginning of the year, the "Climate of risk" report was sent to the presidents of big Polish cities, government authorities, as well as research institutes, Inspectorate of Environmental Protection and public services. We have translated it into English at the request of the European Commission. Insurance Europe has become interested in it. The "Climate of Risk" report file itself has been viewed by over 100,000 people.
The information gathered in our surveys enables us to plan subsequent communication campaigns, and develop educational content. We need much more of it. Has, however, our campaign brought any results? #dontplead campaign was about changing attitudes. It is a slow process, but we believe that each action brings us closer to the expected changes.
We are going to repeat our campaign. In particular, in view of such events as the August storm in the Tatra Mountains in which 5 persons died. Many people who were on the trail then ignored warnings and weather forecasts. In that context, media mentioned our material