STATS WATCH

TowerGroup recently published a research note on GIS that examines three significant areas where GIS is offering carriers great benefits. I think underwriting [is a general priority of GIS], but [GIS] also is very powerful in terms of disasters and catastrophes in managing your claims adjusters out there, asserts Smallwood. Thats where a lot of companies were using this technology with the hurricanes in Florida. Flood insurance, particularly identifying flood plain areas, is the third.
[Insurers] were able to send their claims adjusters to the places that got hit the hardest [following the Florida hurricanes of 2004], adds Matthew Macauley, a research associate for TowerGroup. They had their claims adjusters both on wireless networks and with GIS.

The technology allows claims ad-justers to locate a claimants property even if there is no street sign (or even a building) to mark the property. As Smallwood states in the research note, While the value to an insurance carrier in terms of efficiency of resource deployment can be measured, the goodwill and positive customer service generated by the use of location-based intelligence can be worth much more.

The TowerGroup study lists three areas for underwriting where GIS can serve as a valuable tool: geographic factors in risk, rating territory validation and correction, and personalized risk assessment. The technology will allow underwriters to see visually a territory with their map technology, explains Smallwood. [Insurers] can do it on a new-business and a policy-by-policy basis. It also allows them to take on a portfolio management perspectiveable to see their books of business. Lets say on the commercial side, you want to take on a new mall in a Florida area, you can look at your book of business to see how exposed you are.

Macauley believes the technology permits insurers to break down the risk. Instead of saying this city falls under this code, you can say this mile of this city falls under this code. And the next street over is different because it is farther away from fire hydrants or whatever the case may be, he says.

One industry trend that relates to underwriting involves data validation, notes Smallwood. [GIS] brings editing and data validation closer to the submission of the application, she says. This software will allow the whole validation of the location, which becomes very critical in terms of applying the right rates. What were hearing is that looking at books of business and making sure the right rates are being used can help increase premiums significantly.

The most famous use of one form of GIS, unfortunately, didnt work out. Progressive Insurance may have been ahead of its time in testing automobile coverage with a global positioning system (GPS) in 2001. Macauley believes the reason the Progressive program didnt take off was because the insurer required consumers to buy the GPS component themselves. But, Smallwood adds, many automakers automatically are putting the devices in cars today without activating them. Instead of being a penalty, I think insurers are looking at [using GPS] to be a rewarda way of reducing premiums instead of increasing them, she says. It also gives insurance carriers a baseline, according to the data they get, of how people in a certain class drive, which breaks it down better for [the carriers], says Macauley.

Although Smallwood contends the market for GIS is increasing, the technology has yet to reach wide adoption as a strategic solution for insurers. It may be its a technology that enables the organization of many processes, she suggests, rather than a large initial savings on a few projects.

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