Heikki Vesanto, Manager, GIS Data Science at LexisNexis Risk Solutions explains how commercial insurers can better understand complex data around weather events and their impact.
Commercial property insurance providers need an instant and constant view of their exposures and accumulations as climate change and severe weather events have an ever increasing impact on their loss ratios. For the fourth consecutive year, extreme weather is considered the top global risk by likelihood over the next ten years, according to the World Economic Forum’s Global Risks Report produced in collaboration with Zurich Insurance Group[i]. This insight is not only valuable for underwriting, pricing and claims management, the ability to know exposures where lie and where capacity can be increased can also support a reinsurance submission.
However, the market has access to an overwhelming amount of commercial property risk data. This includes the characteristics of the property; 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. All this data needs to be effectively managed and used. Therefore the challenge has been to find a way that complex property data can be analysed, aggregated and visualised for use within the insurance continuum, based on the undeniable fact that visual imagery is more intuitive and speeds up the ability to assess risk.
This has led to the evolution of geospatial data visualisation tools such as LexisNexis® Map View specifically for the insurance sector. It means that rather than rely on graphs and spreadsheets, insurance providers can actually visualise risk and manage their commercial property portfolios based on a wide range of risk data including ‘live’ data – critical in managing environmental risks.
In the past it might take days or weeks to assess the exposure to a climate event. This was for a number of reasons, such as data being held in many different silos, data not geo-located as well as lack of resource and GIS skills to pull all of this disparate information into one location.
Today insurance providers can quickly visualise, track and act on what is happening based on live data from the Environment Agency and other organisations. Files such as storm tracts can be imported easily and zones created for the identification and analysis of on-cover policies.
Geospatial data visualisation tools offer the market ability to plot out the direction of a windstorm for example and potential route of the damage, swiftly calculate the levels of exposure and export customer lists to forewarn policyholders to help mitigate damage from the upcoming event. As well as upcoming storms, they can visualise areas currently experiencing a flooding event or how fire might spread from building to building in an urban location. Insurance providers can also filter both policy and perils data so that the highest risks stand out.
Consider a fire in a commercial property – if an insurer is able to visualise through geo-spatial data how and where it might spread, within the building and to neighbouring properties, they can quickly calculate their Estimated Maximum Loss and Potential Maximum Loss in real–time and at the same time the ability to mitigate risk for that building is vastly improved. The same applies to flood through access to real-time flood alerts so that effective action can be taken to limit damage.
Risk can be assessed based on building height, location, the proximity to other buildings and perils such as fire, flood and subsidence, right down to building outline level, for a single building or an entire portfolio. Underwriters can also easily see where blocks of risks occur in their property portfolio – for example buildings that have similar fire risks.
Being able to view a whole portfolio also means that insurers have the ability to review past claims helping to price and more importantly mitigate future claims and potential losses. These tools can be used manually to assess the risks at a glance, in addition to flagging up risks automatically on a whole portfolio. The development of an industry wide claims database for commercial property by LexisNexis Risk Solutions, within the next year, will bring a further layer of granularity of the picture built.
Added to this, capacity management tools can help insurance providers target areas where they can sell more business in large cities and automatically identify where they have areas of high concentrations of Sums Insured.
Selecting the right data visualisation platform is vital to ensure the technology is maximised to its potential and Return on Investment is delivered. Flexibility is key – the data visualisation platform must offer the ability to add additional data sources in the future and analyse the resulting information in the most convenient and meaningful way. This will help to ensure commercial property insurance providers are always up to speed in respect of their commercial property risks.
In conclusion, insurance-specific geospatial data visualisation tools can put commercial property insurance providers in the picture at any time of day or night using near real-time data. This data can be used throughout the insurance continuum – marketing, point of quote, underwriting and claims. It means insurance providers can understand location and property risks at a highly granular level, helping them price with pinpoint accuracy, manage their portfolio and take immediate action to limit their exposures.