The energy grid is under unprecedented stress. Aging infrastructure, the increasing frequency of extreme weather events, and growing energy demands create a perfect storm for failure. For insurers, this means a landscape of evolving risk: from power quality problems and outages to electrical fires and wildfire ignition. These challenges don't just disrupt daily life—they can render homes uninsurable, claims unmanageable, and policies unaffordable.
Despite these challenges, there's a silver lining: insurers have never been better equipped to address these risks. Emerging technologies, artificial intelligence, and data insights are transforming how we monitor, measure, and respond to grid stress, offering solutions for insurers to not only manage their own exposure, but also help protect policyholders and the broader community.
The grid under stress
To understand the urgency, we must first examine what's driving grid stress. America's energy infrastructure is aging, with much of it built for a different era. The grid was not designed to handle the intensity and complexity of modern demands, including the increasing electricity needs of electric vehicles, smart homes, and industrial growth. Further, climate change is amplifying the severity and frequency of events that impact the grid like heatwaves, hurricanes, severe convective storms, flooding, and wildfires. Even solar storms pose serious and catastrophic threats. Together, these factors are stretching the grid's resilience to its limits.
This manifests in several ways including:
● Power quality problems: Fluctuations in voltage and harmonics that damage devices and appliances.
● Power outages: Blackouts and brownouts that disrupt lives and businesses, leading to significant economic losses.
● Dangerous power: Electrical faults that spark fires within homes and damage devices and appliances.
● Wildfire risk: Grid failures that spark devastating wildfires, like the tragic events in Maui.
What insurers can do
While insurers can't rebuild the grid, they are uniquely positioned to play an important role in mitigating these risks. Here's how:
1. Get the data
The foundation of any proactive strategy is data. You can't prepare if you don't measure and understand. Advances in IoT and artificial intelligence provide insurers with unprecedented visibility into grid health and performance. Sophisticated sensors—like Ting from Whisker Labs—can monitor electrical systems in homes and across the grid, pinpointing high-risk areas and identifying faults and surges before they escalate.
By leveraging the network data that these smart sensors provide, insurers can uncover patterns in power quality and outage frequency to enhance underwriting models for more accurate pricing and risk assessment and track grid performance in real time to improve claims verification.
2. Help policyholders predict and prevent
Preventing home fires and wildfires sparked by grid stress is simply better for everyone. Partnerships with IoT providers to distribute preventive technology, create a win-win for insurers and their customers. For example, empowering homeowners with free electrical monitoring sensors like Ting, can prevent costly damages and even save lives. Further, educating customers about electrical safety and providing guidance on maintenance, can enable homeowners to protect their homes. This proactive approach can dramatically reduce risk, while fostering customer trust and loyalty.
3. Support policy change and a predict-and-prevent grid
Some grid problems are systemic, requiring large-scale investment and policy intervention. Insurers can play a crucial advocacy role by supporting legislation and initiatives that improve grid infrastructure. Advocating for policies that facilitate the sharing of real-time grid data with utilities, researchers, and relief organizations can help prevent failures and catastrophes, minimize damage and accelerate disaster response. By working with policymakers to fund grid modernization, insurers can drive solutions that benefit everyone: insurers, businesses, homeowners, communities, and emergency responders alike.
This advocacy aligns with another critical opportunity for insurers: addressing the longstanding, complex relationship with utility grid operators. Insurers and grid operators often find themselves on opposite sides of subrogation lawsuits after catastrophic events. While the insurance sector has embraced proactive investments in programs and technologies to "predict and prevent" failures and losses, utility companies have not yet adopted this forward-looking approach. Insurers should unite to encourage policymakers, regulators and utilities to embrace a predict-and-prevent strategy. Progress from utility grid operators would result in immeasurable forward progress for all stakeholders, fostering stronger businesses and a safer, more resilient grid for every home, family, and business.
The stakes are high
Consider the consequences of inaction: EPRI estimates that power quality disturbances cost U.S. businesses between $145 - $230 billion dollars annually. Wildfires, like those in Maui, cost billions in damage and leave communities shattered. These events aren't just tragedies—they're preventable failures.
The tools and technology to predict and prevent these events exist. The challenge now is to deploy them effectively by fostering collaboration across insurers, IoT partners, utilities, governments, and homeowners. When all stakeholders align, the grid can become a safer, more reliable foundation for the lives it supports.
The stressed grid is a problem. With the right tools and the support of their IoT partners, insurers can help turn this into a challenge that is not only manageable but, one day, solvable.
