As reinsurance brokers roll out computerized catastrophe management tools to their insurer clients, unexpected side benefits are emerging, allowing carriers to dream up applications that extend well beyond making decisions about reinsurance–such as tracking agent profitability and mobilizing claims adjusters.
The new tools essentially were designed to allow insurers to see the locations of the risks they write plotted on maps and to analyze geographic accumulations and proximities to catastrophic hazards and terrorism targets, according to developers at two separate reinsurance brokers.
But there are hidden benefits of these tools to unleash the untapped powers of the underlying data that gets put into the models, suggest both Frank Pierson, senior vice president and chief technical officer for Holborn, and Lara Mowery, a managing director for Guy Carpenter.
Data inputs can include policy-specific information such as names, addresses, premiums, lines of business, deductibles, and insured values that are routinely–and blindly–turned over to reinsurance brokers to feed into catastrophe models for reinsurance and rating agency analysis. Also of use are other tidbits of data that have previously unrecognized potential to better inform a host of strategic and operational decisions.
Pierson, discussing Holborn's Eye in the Sky, and Mowery, describing mechanics of Guy Carpenter's i-aXs, each note some revelations their tools can provide for agency-based insurers when these companies supply the reinsurance brokers with information identifying the agent who produced each policy.
"The insurer can start looking at what kind of modeled catastrophe loss ratio each of its agents is producing," Mowery says. Additionally, the insurer might ask, "What sort of geographic spread do my top five or 10 agents have?"
Pierson indicates an insurer also might realize specific agents are growing because they are writing along the coast, prompting the insurer's action to cut those agents down.
A built-in feature of Holborn's Eye in the Sky allows its users to get census data for a particular county, Pierson says. For example, a pop-up box reveals the number of people in one Minnesota county, along with the number of homes, their ages, and other demographic information. By overlaying information about agency locations or market representatives' offices, homeowners insurers can identify areas of market potential–where they may want to grow but perhaps don't have very good agency penetration, he says.
According to Mowery, "As you start to think through the business applications" of the new tools, they become "much broader than just where my risks are and how they are contributing to what reinsurers see."
The uses of these tools "become much more about internally managing your business, making decisions about what kind of new books of business you want to take on or how you want to expand geographically–doing it smartly and with the right review of information," she says, adding insurers now can get at their own information more easily than in the past.
"Clients can get this information from anywhere in the world where they can get to the Internet," Pierson remarks, noting this worldwide access, coupled with ever-evolving enhancements to put real-time weather information into the new online tools, can allow high-level executives to mobilize forces to respond to an event even before damage occurs. "Then [the CEO] can either say, 'I've got to get my claims adjusters ready because this is going to hit us,'" or breathe a sigh of relief knowing the storm likely will bypass areas where the company has written policies, Pierson explains.
Live data incorporated in Eye in the Sky gives clients information to make better decisions as events happen, he says. They're not just managing catastrophe exposures they take on at the policy-writing stage or those they retain through reinsurance decisions.
Pierson sees one of the biggest side benefits of his Eye in the Sky tool in its ability to get insurers simply to pay more attention to the quality of data they gather.
Some clients have recognized poor data quality was one cause of the poor performance of catastrophe models in recent years, and "they're sometimes convinced to spend the money to improve their data just to get a better cat model result," he says.
Holborn hopes tools such as Eye in the Sky–by demonstrating value to inform business decisions beyond the ability to analyze catastrophe risk accumulations–will give another boost to data quality.
Pierson recalls how an enlightened executive embraced the concept during a product demo earlier this year. As Pierson revealed some of the product's typical displays of colored dots on a map representing individual policy locations for each of the insurer's policies, the executive questioned why there were only a few dots appearing to illustrate many, many auto and homeowners risks in a particular region.
The client had provided only ZIP code data, Pierson says, explaining, as a result, the tool's visual representation of policies on a map–a series of layered dots–had many policy locations piled up on a single ZIP code point. "Two weeks later, we got a new database with all the street addresses," allowing Eye in the Sky to convert that one big dot into dispersed policy locations, he reports.
"We're expecting as clients start using this product, their data quality actually is going to start going up," Pierson concludes.
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