Heikki Vesanto, Manager GIS Data Science, LexisNexis Risk Solutions UK & I
Like most areas of the general insurance market, data, analytics and technology are helping commercial property insurance providers make faster and more accurate decisions based on a holistic view of risk. The big difference in commercial property (and to an extent home insurance) is that it is quite literally a picture or map of risk that’s being created – right down to an individual property outline – through the evolution of desktop based geospatial data visualisation tools.
Knowing that visual imagery is more intuitive and speeds up the ability to assess risk, data visualisation tools developed specifically for the insurance sector have become increasingly sophisticated. They help make immediate sense of the huge and growing volume of data at the market’s disposal.
This data includes the characteristics of a property (floors, height, roof type etc.); its location; the individuals behind the business; the crime and environmental risks including near real-time data on flood and river flows direct from the Environment Agency plus customer and policy data held within an insurance providers’ own databases.
All this data can now be analysed, aggregated and visualised in map form for use within the insurance continuum – marketing, pricing, underwriting, claims. It reveals where exposures and accumulations exist in an instant and shows insurance providers where there is capacity to write more business. Fundamentally, the inclusion of all this data allows insurance providers to more accurately price each risk upfront relative to its unique profile.
The demand for this level of insight is only set to grow as commercial insurance providers face changing risks on two fronts. The first is climate change and the cost of claims emanating from extreme weather events. Profitability in commercial property insurance is significantly affected by weather conditions and a recent report suggests commercial property insurance rates were up around 20% on average in Q3 2020[i].
The second is the shift in the use of commercial property space, partially caused by the pandemic. Surveys suggest that the enforced exodus of workers from offices could be permanent for at least part of the week[ii]. Indeed, several banks across Europe have confirmed they will be closing branches and asking staff to work from home[iii]. There are also questions over the future of town centres which were already in decline before COVID-19.
Understanding which insured properties are vacant versus occupied in a flood, fire or a severe storm, knowing roads closed due to fallen trees, where flood water will flow or how a fire in one building could spread to another is now possible through the evolution of geospatial data visualisation tools such as LexisNexis® Map View, enabling complex property data to be quickly and easily understood and acted upon.
When a weather event occurs, insurance providers can look at a specific geographical region, a postcode, an address or a single property outline, pulling on a wide range of data including live feeds from the Environment Agency. This means that rather than wait for an influx of claims to assess the exposure to a climate event, they can upload their policy and claims data to visualise the risks and exposure for a whole book of business. They can understand which policyholders could be impacted and where on the ground resources need to be located.
The flexibility of the tools offered today makes it easy to filter down to the risks most of interest, focus on one property for underwriting purposes or a whole block of properties in the path of a coming storm.
The use of ‘live’ data also means that Estimated Maximum Loss and Potential Maximum Loss can be calculated.
Risk can be assessed as needed or a constant monitor created for a whole commercial property portfolio. Looking at a whole portfolio alongside past claims may also help insurance providers price more accurately and understand how they could help mitigate future claims and potential losses.
As well as supporting underwriting, pricing and claims management, with this visual depiction of risk, insurance providers can easily identify areas where they can sell more business in large cities and automatically see where they have areas of high concentrations of Sums Insured for reinsurance calculations.
Insurance specific geospatial data visualisation tools are enabling the insurance market to utilise the increasing availability of ‘live’ and new data sources related to commercial property risks. This is helping the market to price with pinpoint accuracy, manage their portfolio and get on the front foot when a weather event hits to limit their losses and protect policyholders.
[i] https://www.artemis.bm/news/commercial-property-insurance-price-rises-accelerate-globally-in-q3/
[ii] https://www.bdonline.co.uk/news/london-office-market-collapses-amid-pandemic-deloitte-survey-finds/5109149.article
[iii] https://www.ft.com/content/a15f17d3-dc86-4030-85fe-74a29eb1fafa
