This Incredible Picture Proves That Resiliency Is the Answer

In this article, you can see a picture of the Mexico Beach house that stood its ground in the face of Hurricane Michael.
By: | October 18, 2018 • 4 min read
energy industry

In the aftermath of Hurricane Michael, the terrain of Florida’s Panhandle looks like a combat zone. The structures that remain are scattered awkwardly, embattled survivors with varying degrees of damage.

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But on one block in Mexico Beach, the last surviving beachfront house is attracting media buzz for its remarkable lack of damage. Looking at it, you might assume that Category 4 hurricane missed it entirely. Except that, of course, it didn’t.

The house, dubbed the Sand Palace by its owners, was battered just as badly as its neighboring structures now turned to rubble. But owners Russell King and Lebron Lackey, King’s nephew, built the structure deliberately to withstand the elevated intensity of recent hurricane seasons with meticulous attention to detail and design.

“People are talking about this as the miracle house. It’s not a miracle. Miracles are unexplained, extraordinary events. This one is quite easily explained. It’s a brilliant feat of engineering,” said Katherine Klosowski, vice president and manager, special projects, FM Global.

The Sand Palace, after Hurricane Michael, 2018. Image courtesy of Heather Lackey

The five-bedroom, five-bathroom house, built on 40-foot pilings buried deep in the ground, is constructed of reinforced concrete. The space under the roof was minimized to reduce the risk of wind surging underneath and lifting it off.

A stairway providing access to the house is gone, as is the siding that wrapped around it. But that wasn’t a design failure — in fact it was the opposite. Breakaway walls were built intentionally to tear free without strain on or damage to the main structure.

The Sand Palace was built to standards far exceeding Florida’s building codes. State codes are strict when it comes to windstorm resistance for structures built along the Atlantic shoreline, but it is less so for those along the Panhandle, where full building codes applied only to a one-mile strip along the coast, leaving houses built during that period further inland vulnerable.

“People are talking about this as the miracle house. It’s not a miracle. Miracles are unexplained, extraordinary events. This one is quite easily explained. It’s a brilliant feat of engineering.” — Katherine Klosowski, vice president and manager, special projects, FM Global

In the coastal Panhandle counties affected by Michael, buildings are required to be able to withstand wind speeds of 120 to 150 miles an hour. But the owners of the Sand Palace wanted better odds of survival. They built the their home to withstand 250 mile-an-hour winds.

“In most areas there will be a local code, which is a minimum building code, but if you want to design for resilience, quite often you need to design above that minimum code,” said Klosowski.

She also noted that resilience will have different meanings depending upon the mission of the organization inhabiting a structure, which means it may be necessary to follow standards that go far beyond maintaining structural integrity.

A hospital is going to need to stay open during a hurricane or during a flood, whereas a bus owner is going to want to get into their facility a day after that event passes.

“There are ways that the building can be designed to sustain that — it’s a matter of intent.”

The Cost of Resilience

Information on the cost of resilience enhancements for the Sand Palace is hazy. One of its owners reported to CNN that costs were increased by 15 percent, which falls in line with reports suggesting that property owners should expect to pay 10 to 15 percent more to protect their structures. But it could cost as little as 3 percent to 5 percent more in some areas of the country.

There is evidence that resilience is an achievable — and affordable — goal, even for more modest structures than the Sand Palace.

An aerial shot of the devastation surrounding the Sand Palace after Hurricane Michael hit.

Five recently built houses in the Panhandle region constructed by Habitat for Humanity fared well during Michael. They were built with hurricane ties, thicker lumber, windstorm plywood and metal roofs. Between the five, they lost some siding, one AC unit and one window.

The Habitat for Humanity houses were built to a standard called “Fortified Gold,” developed by the Insurance Institute for Business & Home Safety (IBHS), a nonprofit, independent research organization.

IBHS’s standard puts a heavy emphasis of roof fortification, which is a key factor in any structure’s ability to withstand natural disasters. Special nails and hurricane clips/ties that tighten the roof to wall connection are a vital piece of the puzzle.

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“One of the most common things that happens during a windstorm, as high winds pull across a building, is it pulls off the roof,” said Klosowski. “If you pull off the roof of a building, you lose the structural integrity of that building. The walls are no longer as stable and obviously you’re opening it up for all of the elements and the falling rain to come in. So if you can keep the roof on a building then you’re going to significantly reduce the amount of damage.”

The biggest takeaway from the survival story of the Sand Palace is that the potential for true resilience is no lofty ideal; it’s a tangible, achievable reality. But the takeaway from the mass devastation that surrounds it is that there is a long way to go before resilience becomes the rule rather than the exception.

“The world needs to recognize that its not inevitable that this type of damage has to happen,” said Klosowski. “There are ways that it can be engineered out and it’s a matter of having the intent to do it.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at mkerr@lrp.com

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.