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7 Things Most Insurers Don’t Know About Hazard Data

October 19, 2017
Hazard Data, Property & Casualty Insurance
By: Vivian Nguyen

John Siegman, co-founder and CRO of Hazard Hub, joined us to discuss a few things that property insurers should know about hazard data.

Unless you spend every day thinking about, creating, and updating hazard data there’s probably a lot you don’t know about it. Here are the top seven things that property insurers didn’t know about hazard data.

Hazard Data, Property Insurers
Hazard Data – Fire Risk Assessment

1. There’s a Cost to Not Using the Data

Most hazard data is sourced on a per transaction basis or on an annual license based on anticipated transaction volume. In other words, data costs money. But that cost is minimal compared to taking on unnecessary risk or underpricing a policy. Very few underwriting departments examine the cost of making a bad decision to save a dollar or two on hazard data. The thought process is almost always, what’s this report going to cost? Not, what’s the cost of writing a bad policy?

2. Hazard Data Changes

The hazard data that you used last year to quote and bind a policy may not be the same this year. Hazard databases are evolutionary, not static. Some change annually, some quarterly, and some even monthly. Events that happen or didn’t happen this month, quarter, year, will affect the update of the hazard data and can change the scores of your models. For example, a wildfire will take a high-risk area to a low-risk area literally overnight. It may take three to five years or longer for the vegetation to grow back to make it a high scoring area again.

3. The More Hazard Data, the Better

Typically companies only look at the hazard variables they are interested in. And that makes perfect sense. It’s also a little short-sighted. By acquiring hazard data beyond the basic needs, property insurers can start building up a history of scores associated with a property and find out if other variables are predictive for them and understanding the likelihood of a claim being filed.

4. Hazard Data Can Be Used to Educate the Consumer

You may recall the Farmer’s commercials that showed how to prevent claims. They were humorously teaching consumers how to mitigate risk. Underwriting and claims departments can be leading the charge on mitigation. Hazard data reports provided to the consumer can go a long way in educating the policyholder and reducing claims. As odd as this may seem, very few consumers know their true hazard exposure.

5. Exposure Analysis and Underwriting Should Work Hand in Hand

Some people look at the big picture, some people look at the small picture. Macro versus micro. But the underlying hazard data to look at both pictures should be the same. When you have differences in data, or versions of data, different departments can be sending different messages throughout the company.

6. Using Hazard Data Does Not Have to be Hard

Through the use of software applications like LandVision and APIs, as well as geospatial files, data delivery can be tailored to meet your specific needs. Property insurers can also vary their hazard data delivery by the department, with some departments receiving geospatial files, some reports, and some the API. The easier it is to use hazard data the more likely it is to get used.

7. The More Property Insurers Use Hazard Data, the Better Your Loss Ratios Become

Knowledge is power according to Sir Francis Bacon. And the more you know, the more you know when it comes to accurately writing, quoting and binding a policy. Greater knowledge at the beginning of the policy process equates to better policies written which correlates to better loss ratios.

 

If you came up with some other answers, please send them our way. Clearly, there are more than seven things that aren’t typically known about hazard data, but we stopped at seven. Without getting into all of the technical details of sourcing, update schedules, modeling techniques, etc., the key point is, if you have access to hazard data, use it. If you don’t have access, get it. And that the more data you have the better your decisions will be.

Author Bio

John Siegman Hazard Hub

John Siegman is a co-founder and CRO at Hazard Hub, the only third-generation provider of property-level hazard risk databases spanning the most dangerous perils in the continental United States. HazardHub translates huge amounts of geospatial digital data into easy to understand answers, providing easy to comprehend risk scorecards that are used to make real-world decisions. Our team of scientists provides comprehensive and innovative national coverage for risks that destroy and damage property. Learn more about Hazard Hub.

John has 30 years of experience playing with good and bad data. His career has focused on making better data and making better, more profitable decisions with better data. John started at San Diego Gas & Electric as a market researcher and modeler, then moved onto Equifax National Decision Systems to focus on geodemographic and geo-firmographic data and models. Fifteen plus years were spent in the geospatial realm – with an emphasis on spatial risk and taxation data – covering utilities, insurance, government, and gas & oil for Pitney Bowes and CoreLogic. He holds an MBA from San Diego State University in Marketing & International Business and a Bachelor’s in Marketing & Transportation from the University of Maryland.

 

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