Reports & Research

The Silent Peril Reshaping Homeowners Insurance

Non-weather water damage rarely makes headlines, but it’s quietly eroding profitability across the country.
It is now the fourth costliest peril in homeowners insurance, and claim severity has increased 80% in the last decade—a trend that’s accelerating even as frequency remains relatively flat.

Traditional risk models struggle to capture the early warning signs behind these losses, leading to mispriced policies, undetected exposure, and rising volatility for carriers.

Want the full analysis? Download the complete “Winning the Fight Against Non-Weather Water Losses” guide.

Why Loss Severity Keeps Rising

Aging homes and overlooked system failures

Many of the most expensive losses stem from aging plumbing, deteriorating materials, and slow-burn failures that often go undetected until damage is significant.

Frequency is flat—severity is not

Loss patterns suggest that while the number of events hasn’t surged, the financial impact of each event has—a signal that traditional models are not capturing the right property-level predictors.

The Property Features Most Predictive of Water Losses

The overlooked attributes that traditional models miss

Standard territory- or age-based assessments often ignore the property-specific details that meaningfully influence water loss risk, including:

• supply line material and age
• plumbing configuration
• occupancy patterns
• system maintenance and upgrades
• moisture exposure and prior loss indicators

These factors vary widely between neighboring homes—yet most models treat them as identical.

Where Traditional Underwriting Falls Short

ZIP-code and age-based proxies mask true risk

Legacy approaches rely heavily on broad territory-level assumptions that overlook structural vulnerabilities and system conditions.

Limited visibility creates mispriced policies

Without property-level insight, high-risk homes are often underpriced while lower-risk homes subsidize them—driving loss ratio volatility over time.

Get deeper insights on the drivers of water loss severity in our full guide → “Winning the Fight Against Non-Weather Water Losses”

How AI and Property-Level Data Are Changing the Landscape

AI models trained on real-world claims data can identify early signals of potential water loss by analyzing the interaction between:

• plumbing systems
• property attributes
• historical patterns
• material degradation
• repair history

This enables carriers to segment risk accurately, adjust pricing, and reduce preventable losses—long before small issues turn into major claims.

What Homeowners Actually Understand About Water Risk

Misconceptions around coverage and prevention

ZestyAI’s research shows that many policyholders:

• misunderstand what is and isn’t covered
• underestimate how much damage water can cause
• rarely take preventive actions unless prompted

This disconnect creates an opportunity for carriers to strengthen education, mitigation, and customer engagement.

Steps Carriers Can Take Today

Improve segmentation and rating accuracy

Property-level signals enable more precise risk tiers and more stable long-term portfolios.

Strengthen mitigation and reduce loss severity

Insights help identify which homes are at elevated risk and where targeted mitigation can reduce exposure.

Enhance underwriting workflows with explainable insights

Transparent, explainable AI helps underwriters understand the key drivers behind elevated risk—supporting both decision-making and regulatory review.

Get the Full Guide

Our new research paper, Winning the Fight Against Non-Weather Water Losses, breaks down the trends reshaping this growing peril—and the strategies carriers can use to get ahead of it.

Access the Guide

ZestyAI's analysis revealed that more than 12.6 million U.S. properties are at high risk of hail-related roof damage, representing $189.5 billion in potential replacement costs.

Powered by ZestyAI’s Z-HAIL™ model, the analysis underscores the growing financial threat of severe convective storms (SCS), including hail, tornadoes, and wind events. In 2024 alone, damages from SCS were estimated at $56 billion—surpassing losses from hurricanes.

Yet many insurers still rely on traditional models designed to estimate portfolio-level exposure, not property-level risk. As hail events increase in severity and frequency, these models often miss the structural and environmental conditions that drive real losses.

Kumar Dhuvur, Co-Founder and Chief Product Officer at ZestyAI said:

“Catastrophe models have helped insurers understand where storms may strike and how losses might add up at a portfolio level. But they weren’t built to assess risk at the individual property level, and they often miss the specific conditions that drive hail damage. By analyzing the interaction between structure-specific features and local storm patterns, we can distinguish risk between neighboring properties—enabling smarter underwriting, more precise pricing, and better protection for policyholders.”

Z-HAIL evaluates hail risk using a proprietary blend of climate, aerial, and property-specific data. By applying advanced machine learning to these inputs, Z-HAIL delivers highly granular predictions that reflect both the physical characteristics of a structure and the storm activity in its immediate surroundings.

Key findings from the analysis:

• 12.6 million U.S. structures flagged as high risk for hail-related roof damage
• $189.5 billion in total potential roof replacement exposure

Top five states by dollar exposure:

• Texas ($68B)
• Colorado ($16.7B)
• Illinois ($10.8B)
• North Carolina ($10.4B)
• Missouri ($9.5B)

States with the lowest dollar exposure:

• Maine ($4.7M)
• Idaho ($12.8M)
• New Hampshire ($18.5M)
• Nevada ($49.3M)
• Vermont ($64.7M)

In recent case studies, Z-HAIL has demonstrated the ability to pinpoint which properties are most susceptible to hail damage—even within the same neighborhood and exposed to the same storm. In one example from Allen, Texas, following a storm with 2.5-inch hailstones, Z-HAIL segmented risk across 483 policies, identifying no losses among properties rated “Very Low” by the model. This level of intra-territory precision gives insurers the ability to refine risk selection with confidence—even in the most hail-prone regions of the country.

Severe convective storms are becoming more frequent and costly, putting pressure on insurers to refine underwriting and risk management strategies. 

On April 2, our experts covered:

• Key drivers behind increasing severe storm losses
• What La Niña means for the 2025 season
• How AI-powered risk models improve risk segmentation
• Live Q&A – Get expert answers to your toughest questions!

Missed the live event? Stream now! 

Severe convective storms (SCS)—including tornadoes, hail, and damaging wind events—resulted in $58 billion in insured losses across the U.S in 2024.

Insurers face a dual challenge: navigating the uncertainty of storm patterns while ensuring their portfolios remain resilient enough to absorb the financial strain from clustered, high-loss events.

Research with IBHS confirms that SCS damage accumulates over time, particularly affecting rooftops after multiple exposures to intense storm activity. As housing stock deteriorates, insurers must reassess their portfolios to ensure underwriting, rating, and loss cost controls align with their risk appetite and maintain premiums that accurately reflect evolving exposure.

Get ahead of rising storm risks with expert insights that help you strengthen underwriting, risk assessment, and claims management.

Get our new report.

A staggering $2.15 trillion worth of U.S. residential property is at high risk of wildfire damage, according to a new AI-powered analysis from ZestyAI, the leader in climate and property risk analytics. The study, which assessed 126 million properties nationwide, found that 4.3 million individual homes face heightened wildfire risk—far beyond traditionally recognized high-risk areas.

Using advanced AI models trained on over 2,000 historical wildfires, ZestyAI mapped wildfire exposure at the property level, integrating satellite and aerial imagery, topography, and structure-specific characteristics. While California leads the nation with $1.16 trillion in wildfire-exposed property, other states such as Colorado ($190.5 billion), Utah ($100.3 billion), and North Carolina ($71.2 billion) also face significant risk.

Wildfire Risk is a Nationwide Challenge

While the Western U.S. has historically seen the most severe wildfire activity, ZestyAI’s findings confirm that high-risk properties exist across the country. States like North Carolina (4.6% of homes at high risk), Kentucky (2.9%), Tennessee (2.3%), and even South Dakota (11.0%) are now seeing increased wildfire exposure.

As more homes and businesses are built in fire-prone landscapes, the Wildland-Urban Interface (WUI) continues to expand. This, combined with intensifying climate conditions, is driving higher insurance costs and growing availability concerns. Today, one in eight U.S. homeowners already lacks adequate insurance coverage, and that number is expected to rise.

AI Expands Insurance Access in High-Risk Areas

Attila Toth, Founder and CEO of ZestyAI said:

"Wildfires are threatening more properties than ever before, with billions of dollars in exposure even in areas many people don’t associate with fire risk. Yet, too many homeowners are finding themselves uninsured or underinsured just as these disasters become more frequent and severe. Insurers have traditionally relied on broad, regional models that don’t account for individual property characteristics."

"That means some homeowners are denied coverage even when their true risk is much lower than their neighbors'.’"

AI-driven risk analytics are reshaping the way insurers assess wildfire exposure. By providing granular, property-specific insights, we’re helping insurers make smarter underwriting decisions—keeping coverage available in high-risk areas while ensuring that homeowners who take mitigation steps are recognized.

Last year, our models helped insurers extend coverage to 511,000 properties that had previously struggled to secure insurance due to outdated risk models. In 2025, we expect that number to reach a million, ensuring that even in high-risk areas, responsible homeowners have access to protection when disaster strikes.

Artificial intelligence is reshaping the P&C insurance industry, offering new ways to streamline underwriting, enhance risk management, and navigate evolving regulations.

But as AI adoption accelerates, insurers must ensure they’re using these technologies effectively—balancing innovation with compliance.

Our latest guide explores the most impactful AI applications in insurance, including:

• AI-powered underwriting and predictive analytics
• How regulators are shaping the future of AI in insurance
• Best practices for integrating AI while ensuring fairness and transparency

As AI-driven tools become the new standard, insurers who adapt early will gain a competitive edge.

Download our free guide to leverage these innovations while staying aligned with evolving regulations.

The Rising Threat of Severe Convective Storms

The past few decades have seen a dramatic rise in the frequency and intensity of severe convective storms, resulting in significant financial repercussions for the insurance industry. In the last year alone, insured losses from severe convective storms reached an astounding $60 billion, marking an average annual growth rate of over 11% over the past twenty years. This alarming trend means a new approach is needed to manage and mitigate the escalating risks associated with severe weather events.

In the last year alone, insured losses from severe convective storms reached an astounding $60B, marking an average annual growth rate of over 11% over the past twenty years.

The traditional methods of risk assessment and management are no longer sufficient to cope with the increasing unpredictability and severity of these weather events. As the risk evolves, so must the solutions. Changing risks call for innovative solutions that leverage advanced technology and data analytics to enhance the accuracy and effectiveness of risk modeling.

A New Approach

ZestyAI’s Z-HAIL and Z-WIND models are specifically designed to address the challenges posed by severe convective storms. In a new retroactive case study, we explore the performance of these models on a carrier’s book of business over the prior five years, highlighting their effectiveness in delivering comprehensive coverage and precise risk segmentation.

Key findings from the case study include:

Comprehensive Coverage with High Accuracy

One of the standout results from the case study is the exceptional hit rate of 99.7% achieved by Z-HAIL and Z-WIND. This shows the models were able to accurately identify and assess the risk of severe convective storms for nearly all the properties in the carrier's portfolio.

Strong Risk Segmentation

The models demonstrated remarkable capability in risk segmentation, with Z-HAIL generating a lift of 62X and Z-WIND achieving a lift of 9.7X. This means that the models were able to effectively differentiate between high-risk and low-risk properties, even within small geographic areas such as a single zip code. Accurate risk segmentation allows insurers to tailor their policies and pricing strategies more precisely, leading to better management of their risk exposure.

Improved Combined Ratio

Implementing Z-HAIL and Z-WIND would significantly enhance a carrier’s combined ratio, calculated to be approximately 4 points in the first year. This improvement can be attributed to the models’ ability to optimize underwriting, rating, and the application of deductibles and Actual Cash Value (ACV) endorsement strategies. By accurately assessing the risk and applying appropriate measures, insurers can reduce their loss ratios and improve overall profitability.

The Need for Innovative Solutions

As severe convective storms continue to pose significant challenges to the insurance industry, adopting innovative solutions like ZestyAI’s severe convective storm models can help insurers better manage this escalating risk.

These models provide comprehensive coverage, accurate risk segmentation, and improved financial performance. By embracing advanced technology and data-driven analytics, insurers can navigate the complexities of severe weather events and safeguard their portfolios against future losses.

To learn more about the detailed findings and benefits

Download the full case study.

As part of our relentless focus on helping property and casualty insurers make smart risk decisions, every month I travel across the country to meet with insurance executives. One of the first questions I am asked is what sets ZestyAI apart from our competitors. I love being asked this question because it allows me the opportunity to share our passion for building an impactful company amidst the rapid technological transformation of the more than 650-year-old Property & Casualty (P&C) industry.

In my previous blog post, we delved into the origins of ZestyAI.

Now, let's explore what makes us stand out.

1. We Are a Risk Analytics Platform. Not an Aerial Imagery Data Company.

A Distinct Information Advantage

At ZestyAI, our primary focus is delivering comprehensive insights on climate and property risk for every residential and commercial property in the US. We are not just a data vendor; we are a risk analytics platform.

Our models create a distinct information advantage through their ability to split risk "intra-territory," which can not only help avoid risky policies, but more importantly price to risk allowing companies to grow with quality risk. This provides our clients with actionable insights that go beyond mere data points. Think about ZestyAI products as the FICO score for property and casualty insurance. Just as the FICO score, a measure of consumer credit risk, has become a fixture of consumer lending in the United States, ZestyAI’s peril models aim to simplify climate and property risk assessment for insurance carriers and mortgage lenders.

We are not just a data vendor; we are a risk analytics platform.

Our team of data scientists, deep learning and machine learning experts, and climate scientists are constantly refining and expanding our capabilities. This dynamic approach ensures that we stay at the forefront of technological advancements and deliver unparalleled value to our clients. 

ZestyAI's Focus on Results

ZestyAI’s emphasis on data and artificial intelligence is not an end but a means to achieve the ultimate goal: improving risk management and pricing strategies for insurers. By focusing on the end results—better risk assessment and pricing—we ensure that our innovations translate into real-world benefits for our customers.

The powerful platform we have built provides, at an individual property level, a holistic view of the multitude of peril-specific risks that insurers face. This includes property intelligence for essential parcel, structure, and roof insights; climate models covering wildfire, wind, hail, and storms; and our most recent addition Z-WATER, tackling the challenge of interior water damage. This allows insurers to move from territory-based segmentation to a property-by-property risk assessment. In total, the ZestyAI platform covers over 85% of all peril-driven losses.  

2. Built by Data Junkies for Data Junkies

The Depth and Breadth of Our Data Is Unmatched

While high-resolution imagery is an important component of our models, it is by no means the only input. ZestyAI stands out by integrating 200 billion data points across more than a dozen unique data sources that are new to the P&C industry to maximize risk differentiation. We extract insights from non-imagery data, such as building permits, property sales databases, tax assessment data, and localized weather stations, among others. This comprehensive approach allows us to create a unified and federated database for every property. 

Unique Approach to Data

Our approach to imagery is also unique. ZestyAI products leverage satellite, aerial, and terrestrial imagery to create AI-generated 3D analysis of every structure. As for aerial imagery, we have been partnering with all leading providers and as such we have been training our models on multiple image sources for almost a decade. Having integrated with all major providers rather than relying on a single vendor also allows us to achieve a nearly 100% hit rate. This flexibility ensures that we have the most up-to-date and accurate data available, enhancing the precision of our models. 

As for aerial imagery, we have been partnering with all leading providers and as such we have been training our models on multiple image sources for almost a decade.

By combining these diverse data sources and applying proven artificial intelligence to identify risk, such as roof quality, lot debris, and driveway condition, we provide insurers with a holistic view of property risks. This enables them to make more informed decisions for underwriting, rating, and portfolio management. This multi-faceted data integration is a key differentiator that sets ZestyAI apart from other data vendors in the industry.

3. We Live and Die by ROI and We Know How to Deliver It.

Industry Expertise and Customer Success

One of our strongest assets is our deep understanding of the insurance business and the key value drivers for carriers. We have built a team that includes former executives from leading carriers like Farmers, MetLife, and Progressive, and data analytics providers like CoreLogic, RMS and Guidewire, who bring invaluable industry expertise to our company. 

“We have walked a mile in your shoes” is a phrase we often use when partnering with our customers. Because of this, we don't just throw data over the fence. Rather, we align our models and risk scores to key use cases, ensuring that they are relevant and actionable for our clients. Through our customer success program, we operationalize what each customer needs. We engage closely with our partners, working side-by-side to implement our models and monitor value capture. ZestyAI’s commitment to delivering 10X ROI is a cornerstone of our philosophy and sets us apart from those with a more transactional approach. 

ZestyAI’s commitment to delivering 10X ROI is a cornerstone of our philosophy

Engagement with Regulators

Our deep engagement with regulators further underscores the company’s commitment to delivering value in the context of a highly regulated business. Despite initial skepticism from industry experts about the feasibility of getting an AI model approved, ZestyAI became the first to gain approval as part of a carrier rate filing from the California Department of Insurance (CDI). 

Since then, our model has been adopted for rating in all wildfire-prone markets across the US, providing our clients with the confidence that our solutions are innovative, effective, and compliant. Similarly, our severe convective storm suite of models, including Z-HAIL, Z-WIND, and Z-STORM, have been filed, reviewed, and approved by regulators in multiple states across the country, including Texas, Colorado, and Illinois.  

Protecting What Matters Most

At ZestyAI, our mission goes beyond just providing cutting-edge risk analytics—we are dedicated to protecting communities and livelihoods from the perils they face. By focusing on risk analytics, leveraging unique data sources, and drawing on deep industry expertise, we empower insurers to make smarter, more precise decisions that ultimately contribute to safer, more resilient communities.

Commitment to Transparency and Compliance

Our transparent approach, coupled with deep industry expertise, allows us to deliver unparalleled insights into property risk. We work closely with insurers to understand the factors driving risk at each property, enabling them to partner with homeowners to mitigate potential losses. Our commitment to transparency extends beyond our product. We maintain open communication with regulators to ensure our models align with evolving regulations. This rigorous approach guarantees that our solutions are not only innovative but also practical and effective in addressing real-world challenges.

Vision for the Future

As we continue to push the boundaries of what’s possible in risk management, our vision remains clear: to harness the power of data and AI to help our clients safeguard the future. Together, we are setting new standards in the P&C industry—standards that prioritize resilience, innovation, and above all, the well-being of the communities we serve.

Our vision remains clear: to harness the power of data and AI to help our clients safeguard the future.

Ah, and there is one more differentiator, probably the one that I am most proud of: at ZestyAI we don’t hire B-players or jerks. You will know what I mean once you meet our Zesties.

In our next post, I will explore how ZestyAI's relentless focus on value creation is driving a 10X ROI for our customers and making a meaningful difference in the world.

Are rising storm costs and inaccurate roof assessments impacting your bottom line?

Now available to stream, The Science of Roof Risk master class will equip you with the latest strategies and techniques to master roof risk assessment.

• Enhance your roof risk assessment by 60X
• Improve your combined ratio
• Reduce storm-related roof claims
• Strengthen new business selection

What we cover:

Your presenters, Ross Martin (VP, Risk Analytics) and Sam Fetchero (Head of Marketing) will share with you:

• The Problem of the Roof:  Uncover the underlying factors driving rising storm losses and why traditional risk assessment methods fall short.
• The Science Behind Predicting Losses: Explore key factors impacting  roof risk and loss prediction, including roof age, condition, complexity, and peril-specific models.
• Accuracy-focused Risk Models: Discover advanced modeling techniques that enhance predictive accuracy.
• Understanding Storm Climatology: Learn how storm climatology impacts roof risk and how to integrate these insights into your risk assessment strategies.
• Real-World Results: Witness a comparative analysis of these predictive factors using actual carrier data. Understand the strengths and weaknesses of each approach.
• Priorities of Leading P&C Insurers: 
  See what your peers asked with valuable insights to take back to your team.

Who Should Watch?

This video is ideal for Executives, Product Managers, Actuaries, Underwriters, and CAT Modelers committed to enhancing their roof risk assessment capabilities. 

Bonus Guide

As a bonus for watching, you'll receive a downloadable study on the latest roof risk assessment strategies: Preparing for the Storm: The Insurers Guide to Roof Risk.

Access Now

From Costly Water Losses to Millions in Savings

Non-weather water claims are a leading cause of property insurance losses, costing insurers over $20 billion annually. 

Join us for a FREE live webinar where our experts will discuss the latest trends, challenges, and insights to help you mitigate non-weather water risk.

What We'll Cover

Our experts Rob Silva, ACAS (Director of Customer Success) & Sam Fetchero (Head of Marketing) will present:

• Current Trends: Understand the rise in severity and total loss costs of non-weather water claims.
• Risk Assessment Challenges: Learn why traditional methods fall short in assessing non-weather water vulnerability.
• Key Risk Factors: Identify the main drivers of non-weather water damage.
• Strategic Insights: Discover strategies to improve your management of non-weather water claims.
• Z-WATER in Action: Experience our new AI-powered model that predicts non-weather water risk with unparalleled accuracy.
• Interactive Q&A: Get your questions answered by our experts.

Who Should Attend

This webinar is ideal for Executives, Product Managers, Actuaries, Underwriters, and CAT Modelers committed to enhancing their understanding and management of non-weather water risks. 

Bonus Content

As a bonus, you'll receive our exclusive infographic, "Below the Surface: Research Reveals Knowledge Gap in Homeowner Water Loss Prevention and Coverage."

This research gives key insights into water loss experiences, coverage details, homeowner protection measures, and information on water shutoff devices and heater conditions.

Register Now