THE NEW FRONTIERS
The Role of Location Intelligence in Insurance
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Contents 1. Overview .......................................................................................................................................3 2. Role of Location Intelligence in Insurance .......................................................................................6 3. Location Intelligence Applications ...................................................................................................8 4. Competitive Landscape ..................................................................................................................9 5. References ................................................................................................................................... 12
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1. Overview In insurance industry, every policyholder has a location, commutes in varying levels of traffic, and lives in a region that may or may not be prone to environmental risks. Hence, geography becomes an integral part of insurance data. Here Location Intelligence (LI) comes into the picture. LI shows demographic and statistical data onto a map, providing visual analysis of the data to make an informed decision. Integration of geographic data with the existing business intelligence (BI) platforms provides insurance companies business insights and helps them map business strategies by providing visualization, advanced analysis, and data enhancement. Combination of spatial data with business intelligence data delivers insurance analytics not achievable via BI or Geographical Information System (GIS) alone. A spatial lens on BI data for policies, expenditures, underwriting, environmental risk, regional demographics, and marketing strategy can help an insurance company minimize its losses. Location intelligence in insurance has increased over a period of time, mainly due to high incidence of catastrophic losses in the US. Monitoring of these events has become a significant factor for insurers to minimize their loss exposure and increase profitability. Adoption of the LI technology is high mainly in developed geographies such as the US, Canada, the UK and Australia, while there is a lot of opportunity in developing markets such as MENA, China, India and Asia. Location intelligence is used widely in almost all stages of the insurance process, from market segmentation, sales, underwriting to claims process. It gives insurance executives, underwriters, adjusters, marketers and agents a visual insight to comprehend huge amount of scattered data. Insurance carriers should adopt various LI data and solutions to make apt use of the technology, since dependence on a single provider may not yield comprehensive data. This research outlines the need and use of location intelligence in insurance and the provider landscape for this service.
What is Location Intelligence “Location” relates to tagging and storing pieces of raw data with their specific location, and “Intelligence” relates to turning raw data into actionable insights using data analytics techniques. Location Intelligence integrates analysis of people, of businesses, of points of interest, or of geographic regions with their spatial attributes (such as average age, median income, average driving distance, or average educational attainment) for an informed decision-making for operational efficiencies, revenue growth, and effective management. These location intelligence capabilities can be integrated with both operational and analytical applications to help increase revenues and decrease costs. LI creates visual maps that enable users to view the relationship of objects in space and perform a variety of spatial calculations. It is used in various industries such as Insurance, Logistics, Retail, and Oil and Mining
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Need for Location Intelligence in Insurance Earlier, insurance carriers used to rely on outdated excel spreadsheets or obsolete strategies such as using ZIP code tables as a key factor in understanding risks, determining premiums, or targeting new markets. However, in the mid 90’s, catastrophic losses due to hurricanes, earthquakes, and floods in certain regions of the US made insurance companies realize the importance of location intelligence. Increasing probability of extreme and catastrophic weather events has made monitoring of the frequency and impacts of natural disasters a critical function for the insurance carrier providers. Location intelligence assists insurers to better understand these critical events and helps respond to customers by tracking, ahead of time, severity of an event. Insurers can view information about storm conditions, along with policyholder concentrations in the affected areas. This allows them to make timely decisions to ensure they have adequate resources available to service their policyholders at a time when they are needed most. According to a survey conducted in 1H10 with a sample of 59 P&C and life insurers in the US and Canada, 60% of personal carriers and 54% of commercial carriers were investing in new technologies to improve their claims department. Of these companies, only 5% were investing in GIS/geocoding, which is part of location intelligence.
Acceptance of Local Intelligence Globally
Source: Pitney Bowes MapInfo
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Application of Location Intelligence in Insurance
Below image shows the estimation and analysis of severe storms. It identifies which county will be highly affected on the basis of a zip code, total insured value and loss. This analysis will help underwriters get an immediate picture of the risk associated with any property.
Source: SpatialKey
Below image shows dashboard of key regional metrics of an insurance company that embeds an interactive map letting users model risk exposure of simulated hurricanes. It analyzes risk details by region on the basis of total insured value, net loss, policies and claims.
(Source: ESRI)
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2. Role of Location Intelligence in Insurance Use of the location intelligence technology in the insurance industry has grown exponentially post Hurricane Katrina in 2005. The devastating hurricane season made it apparent to insurance companies that they needed to base their risk management decisions on better data and augment their catastrophe modeling with new tools and practices. Location Intelligence supports the insurer at various stages of the insurance process, from sales and marketing, pricing, fraud analysis, underwriting to claims processing. In addition, it has overhauled the entire insurance business model by providing deep insights into risks that were undetected earlier. Sales and Marketing •
Location intelligence helps insurance carriers in assessment of underserved areas and identification of the target market on the basis of geographic and demographic factors of a particular location
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LI platforms can be integrated with the existing analytics applications for customer segmentation and market penetration for any particular area
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LI solutions for insurance also turn data about customers, trade area, and marketing operations into knowledge that provides greater insight into performance
Customer Helpdesk or Online Service Portal •
Integration of location Intelligence in helpdesk portals helps customers locate the near-by agents by doing searches based on postal code or home address. Availability of this online agent locator service can considerably reduce the amount of phone calls received by the helpdesk
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Auto insurance carriers can provide its customer with access to a self-service portal as part of their membership –
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In case of any road traffic incident, the customer can immediately log on to the portal and interact via the mapping interface to identify with his/her insurer the exact location of the incident The insurer can then add location co-ordinates of the car repairer and home address of the claimant and third party to provide the best visual picture to make an informed decision
Agent Locations •
LI helps the insurance carrier to determine exact location of an agent and penetration of the agent in a particular area. Visual maps on the LI platform can provide whether the service area is overlapped by agents or underserved, which were not visible in tables or list of data of the carrier. The carrier can also further align agents based on the customer segments
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Detection of Fraud •
LI can help the insurance carrier identify crimes and fraudulent activity around specific locations, enabling identification and flagging of specific claims for investigation. The insurer can evaluate claims related to any events such as flood and earthquake to determine whether the claims come under the affected area or outside the area
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LI platforms provide tools to spatially analyze and visualize claims data as well as to identify geographic trends or abnormalities that would otherwise not be seen
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Capturing accurate location of a road traffic incident has been difficult for insurers. But the use of GPS technologies and LI solutions have vastly improved the process and can quickly help identify anomalies or inconsistencies in submitted information
Underwriting Risk Assessment •
Location intelligence tools can help underwriters assess the property using mapping technology to view its proximity to risks –
To analyze whether the particular insured property is close to flood zones, nuclear power plants or to evaluate the quantity of risk within a specific region (e.g., street, building and map grid)
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Advanced visibility into property risks of a building or location can significantly reduce the risk from decisions made in the underwriting process. It can help underwriter create more precise rating territories, set competitive pricing with detailed risk segmentation, and ensure that policy premiums accurately reflect the true risk
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LI can also be integrated into the insurance carrier's automated underwriting and rating applications, working within rules engines to feed the appropriate location information needed to score or process geographic risk rules –
Policies can be rated more accurately when rating territories can be visualized, helping minimize underwriting leakage and ensure regulatory compliance
Claims Management •
LI eases the claims handling process of insurance carriers, especially during a catastrophic event. An insurance company can view all the properties insured before and after the event to assess potential claims exposure, proactively contact customers or evaluate claims severity –
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LI technology can help identify the area to establish temporary claims offices that will have close proximity to majority of affected policyholders
LI can improve claims processing and customer service, mainly by evaluating potential claims in areas exposed by disasters, planning claims service resources based on the projected need, and deploying a claims officer when disaster strikes
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3. Location Intelligence Applications Desktop Applications • •
Desktop LI applications combine SQL access with business logic for a wide range of applications across every public and commercial market. Some applications provide primary access spatial data for visualization wherein - analysis and interpretation is left to the user, while others take full advantage of spatial relationships in the data such as proximity, containment, or connectivity and use them in complex models such as those used to optimize a network of locations
Spatial Servers • •
Desktop LI software often works with server-based software for delivering location intelligence to large enterprises. These servers provide map-centric LI applications and embed them into traditional BI tools or directly into operational business applications, bringing maps and spatial analysis to transactional business systems
Web Applications • •
Web applications help in designing, implementing, generating and delivering maps on the web browser. An insurance agent can easily access these applications on the internet These applications generally leverage Web 2.0 technologies for building highly visual and interactive maps.
Mobile Applications • • •
These applications help take location intelligence on field. They provide maps on mobile devices and help field workers who need maps to navigate or to collect geo-referenced data in the field They are also useful for executives and managers to access LI on their smartphones and tablets while travelling In insurance, field-based underwriters can use mobile applications as they visit properties or meet with agents or customers. They can further use their mobile devices to access valuable risk data information
Cloud Application • •
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Cloud is a recently introduced technology in location intelligence, adoption rate of which is accelerating as more and more insurance companies are moving to cloud Cloud computing is ideal for location intelligence platforms, for it provides increased data capacity and flexibility to update changed data. The technology can be rolled out in hours and made available on any PC with a Web connection It is also of great help to small and medium insurance companies as they don’t have to maintain servers at their end and the cost is less than the traditional enterprise software
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4. Competitive Landscape To deploy the location intelligence solution, insurance companies should combine various data points and solutions to get a comprehensive and detailed analysis of a particular location or area. A single LI provider will provide limited information for decision making, which may lead to invalid decisions due to high dependence on a single location risk factor. Use of various data sources and models on top of the existing platforms will help insurance companies significantly reduce risks, streamline operations, save money, boost productivity and accelerate the flow of information.
Type of Providers
Players Government agencies provide basic data on locations to identify zones and risks
Government Agencies
National Oceanic and Atmospheric Administration (NOAA) – It is a scientific agency within the United States Department of Commerce focused on the conditions of the oceans and the atmosphere Federal Emergency Management Agency (FEMA) – It is a US-based government agency that helps identify and locate catastrophic events
Advanced Geocoding Services Providers of Property Risk Models Mapping Software Provider Niche Solutions Provider
Geocoding service assigns a latitude-longitude coordinate based on street address, postal code or administrative boundaries, which helps locate the exact location on a map Providers include Esri, Pitney Bowes, Caliper, eSpatial and NAVmart Providers include RMS, CoreLogic and ISO. They provide GIS data that can be used for risk assessment as well as catastrophe modeling Provides solution to explore, visualize, and share GIS information on maps. These software are available on Desktop, mobile and Web Esri, BroadMap, Google Maps, Yahoo, Microsoft Pictrometry and EagleView Technologies are few niche property solutions provider targeted at assessing property location, size and location risk
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Case Study Willis Willis, a multinational insurance brokerage company, is using Spectrum by Pitney Bowes enterprise location intelligence solution, for improved international geocoding. With the help of Spectrum, Willis can now translate address information within policy details into latitude and longitude points, which can be used for detailed risk analysis. The solution has increased locational accuracy and helped Willis’ catastrophe models deliver reliable results and risk estimations for catastrophic hazards with better accuracy. Geocoding Module enables Willis’ clients to make international comparisons across country lines to create effective pricing, underwriting and risk management. TAPCO Underwriters, Inc. TAPCO, an insurance underwriter in North Carolina, the US, provides excess and surplus lines of business for both commercial and personal lines accounts. As the company underwrites specialty lines of business, it focuses on homeowners and general liability insurance. For this, the distance of a particular policy from the coast is a key factor for determining risk exposure. Earlier, the company used to follow manual methods to calculate this distance-to-coast ratio to provide the insurance agent whether the policy is eligible for a deductible. (Insurance companies calculate deductibles on the basis of the distance-to-coast ratio, lesser the distance lower the deductible and vice versa.) However, manual calculation was not so accurate. TAPCO implemented the MapInfo’s (acquired by Pitney Bowes) professional desktop mapping application and EnvinsaTM, a location intelligence platform to automate and standardize distance-tocoast calculations for all of its policies. Post their implementation, TAPCO can tell the insurance agent the exact distance from the coast and the amount of deduction the policyholder can get. It has also considerably reduced the staff time and improved the quality and reliability of risk measures.
Summary Adoption of location intelligence is considerably low in the insurance sector, mainly due to lack of awareness and high cost of investment. Majorly Tier-1 companies have made significant investments in the LI technology, but its adoption in Tier-2 and Tier-3 companies is considerably low or negligible. Region wise, the technology is more prevalent in mature geographies like the US, Canada, and the UK, where geographical information is available, while non-availability of suitable data limits use of LI in certain countries. Despite some hurdles, potential market for this technology remains huge as many insurance carriers are willing to utilize it to reduce their loss exposure and boost profitability. Given geographic relationships
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are inherent in most information, the ability to map, visualize and understand data from a geographical standpoint will become increasingly important for an insurance company.
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5. References -
Location Intelligence: Changing the Competitive Game for Insurers
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Location Intelligence and Property Insurance: Underused Assets to Improve Risk Decisions, Gartner
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CASE STUDY: TAPCO, Map Info
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Pitney Bowes: Un-Risky Business, The Role of Location in Insurance Risk Management
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Pitney Bowes: Enterprise Location Intelligence
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Location intelligence: the new DNA of insurance, Map Info
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Press Release: Willis Chooses Spectrum from Pitney Bowes Business Insight for International Geocoding
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Location Intelligence: The Success
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The World of Location Intelligence Today
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