With continued pressure on underwriting results, Tim Jones examines the role new technology can play in property risk management
Profitable property underwriting remains just an aspiration for many insurers, as recent experience has been coloured by both natural and man-made disasters.
While technology cannot (yet) control such events, the application of new tools can help insurers create portfolios with a more informed balance of risk.
More than ever before there is a significant quantity of data that can be used to evaluate risk. To gain benefit, however, this profusion of data has to be turned into a clear and consistent analysis to support risk assessment and underwriting.
Customer relationship management has been applied to the customer service function to provide a single view of customer interactions. In a similar way, representing risks in a geographic context enables a risk manager to consider the broader implications of each individual decision.
To understand this, the risk can be presented by amalgamating a variety of external data sources into a single, map-based view placed in context with its surroundings. Validating the information about the property, its location, neighbours and other facts (such as planning data, flood and subsidence) assists in the basic underwriting checks. Augmenting this with the data that insurers have locked within existing systems adds significantly to the value that this technology can provide.
Perhaps the primary benefit is more rapid and effective management of risk accumulation. With all insured property within a given radius identified visually, the impact of a given risk on the whole book of business can be quickly assessed. Automated rules can be established to ‰ ‰ provide warnings should certain accumulation values be exceeded. Providing basic links to existing claims systems and survey information can provide benefit too.
At the point of risk assessment an underwriter can consider not only the current situation, but also apply some historical context to the decision. For example, while theft models may indicate moderate risk, it may be that actual loss experience for a given area indicates otherwise.
Having this information to hand will assist in setting appropriate pricing for the risk, or rejecting it entirely. Finally, the insight that can be provided via this approach can assist in providing clear information on which to base a re-insurance decision - a key topic as premiums continue to rise and capacity is constrained.
It sounds simple but doing it is much harder. Address-Data has produced software that is claimed to be way in advance of anything else in this field.
"Address-Data has solved the problem of consolidating multiple information sources to produce a single set of information about a given property," says Address-Data managing director Philip Highland.
"This includes commercial property where historically data has been poor due to the absence of postcodes."
Moreover, the use of internet technology enables these services to be used in conjunction with existing underwriting and claims IT systems. This simplifies integration and accelerates delivery of benefits. And analysis in the US and UK markets indicates that taking this type of approach can deliver substantial savings in both improved loss cost (through creating a more balanced book of business) and lower expenses (through more efficient use of time). n
How to build a picture of risk
Having logged on to the website, the underwriter selects the property by either company name or postcode. An aerial view is immediately generated (above) with the property identified (in red).
The aerial view can be zoomed in and out of to view details that may influence the underwriter's decision - for example the funfair or railway cutting. A click of a button will then reveal (in blue) all the other risks in the area on which the insurer has information.
The risk (left) is a regional Norwich Union office. Having identified the building and reviewed its context, the underwriter can select and review details for any of the neighbouring properties that it currently insures (orange arrows) as well as others that it has details on (blue arrows).
All sorts of accumulation of risk and local claims history can be revealed in a highly intuitive fashion ranging from burglary locations to arson. The underwriter is not limited by postcodes which are poor at revealing adjacent risks.
Flood risks from the neighbouring river (above) are highlighted in blue. In the same way the system can highlight coastal flooding risks. Interruption of business from, for example, flooded access roads, can also be seen.
