Like the rest of the country, California is grappling with more intense and frequent extreme weather — and the fallout of skyrocketing insurance premiums and lost coverage. However, an insurance startup is taking a chance on homeowners in high-risk areas, and its AI-driven system has attracted millions of dollars in investments.
What's happening?
As Inc. Magazine detailed, legacy insurers are pulling out of the Golden State and dropping coverage from homeowners in areas with a high fire risk or other significant climate-related threats.
San Francisco-based startup Stand is stepping in and offering coverage to these homeowners, saying it's using artificial intelligence and advanced modeling software to better understand fire risks and formulate a way to mitigate potential problems before an event.
Valued at $95 million, Stand has received funds from backers such as Equal Ventures & Convective Capital (which invested $30 million in the Series A round), Inspired Capital, and Lowercarbon. It projects it will write $2 billion in California home coverage policies in its first year.
However, there's a catch or two: The company is only starting with homes valued at $2 million to $10 million, and the insurance isn't cheap. According to the report, the Wall Street Journal revealed that yearly premiums for a $3 million home in a high-fire-risk zone could be $12,000 to $15,000.
Why is this important?
Homeowners like Mark Mitchell, who spoke with the Journal, point out that having expensive insurance is better than having none, and Stand's AI-powered system that simulates the impact of weather disasters is making that possible.
"They are the only company that has been able to figure out how much we've done to protect our house and that it's a reasonable risk to insure," he told the publication.
Indeed, a growing number of homeowners are struggling to find coverage as warming global temperatures have supercharged extreme weather events. NBC News reported in September that around 1 in 8 homeowners are going without, alarming industry experts.
Stand's vision of insuring the otherwise uninsurable is filling a crucial need. However, with dirty fuel pollution primarily driving Earth's rising temperatures, it's worth questioning how the startup's system might impact the planet down the road — potentially exacerbating the insurance crisis.
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The Cool Down couldn't find any specifics regarding sustainability on the company's official website, but AI tech is notorious for requiring vast amounts of power to operate, which results in significant pollution given that most of the U.S. grid uses dirty energy.
If the company is constantly running new AI calculations, it could be consuming high amounts of energy from the grid, but it's more likely that it is running its calculations in a more limited scope at the times it needs to update its data.
What can be done about the insurance crisis?
Officials in some states are fighting to keep people insured. For example, California launched a "Fair Plan" for basic coverage to help homeowners get up to $3 million in coverage (this is partially why Stand is focusing on homes valued at $2 million to $10 million, per Inc. Magazine). Florida has passed laws aimed to prevent deceptive insurance practices and post-storm fraud.
Meanwhile, a simplified AI algorithm from BitEnergy AI is showing promise in reducing AI's massive energy requirements, providing hope that Stand's AI-driven system could lead to more comprehensive insurance solutions for other companies without an extreme environmental toll.
Ultimately, though, bringing the planet's climate back into balance is the best way to limit the threat of more intense extreme weather. Upgrading to energy-efficient appliances and other home solutions (like smart thermostats) is a proven way to slash dirty energy pollution — and even recoup some cash that would otherwise go toward utility bills.
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