GIS is used to calculate premiums far more accurately, speeding up the turnaround time of risk assessments to being available instantly.
Delivering a new dimension in risk management
A pioneer of GIS in the insurance industry, Royal Sun Alliance (RSA) uses Esri’s ArcGIS technology to help it more accurately assess risk levels at individual properties and addresses. This insight enables it to optimise its profitability, reduce over-exposure to risk and operate more efficiently.
Originating in London, RSA is one of the world’s leading multinational insurance groups. It specialises in general insurance, and has 17 million customers in 130 countries.
RSA has improved operational efficiencies, speeding up the turnaround time of risk assessments from several days to being available instantly
GIS enables RSA to calculate premiums far more accurately, based on a more reliable understanding of actual risks
The organisation can sell more insurance policies to a wider number of customers, whilst avoiding over-exposure to risks
RSA wanted more accurate tools for managing exposure to risk in commercial property, optimising capacity, handling claims, purchasing reinsurance, and targeting marketing campaigns.
“ GIS has a massive future in my industry; we are really only just dipping our toe in the water, and I genuinely believe that my organisation is one of those leading the way ”
Graham Heale – Property Portfolio Director
The Esri UK insurance platform comprises hubs (modules) providing spatial support to business functions. It uses xy coordinates to establish the distance between a building and a nearby risk, within 1-2 metres of accuracy, spatial analysing the effect. It interoperates with leading platforms and data formats, in server and mainframe environments. Most processing is “behind the scenes”, so commercially sensitive data can be managed inhouse and training requirements are minimal.
When a customer calls, the address is geocoded and passed to the perils hub, for risk scoring. If the accumulation hub finds RSA’s exposure at this location is within defined limits, the new risk is automatically approved and the accumulation hub data updated. (If exposure would be too high, the location is flagged for investigation.)
“ The Esri UK Insurance Platform can provide assurance to regulators and shareholders that RSA fully understands the risks it underwrites ”
Accuracy reduces risk
Postcodes are too vague. Using xy locations pinpoints where each building is in relation to others, and adding data layers (e.g. crime, flood and subsidence) means risk assessment and premiums can be more accurately calculated. “Having that much more granular idea of where our risks are – and where they are approximate to each other – ensures we don’t overexpose ourselves”, explains Graham Heale, Property Portfolio Director.
Optimised capital capacity
With reliable risk assessment, RSA allocates capital and manages reinsurance more effectively, freeing capacity to sell more insurance, whilst avoiding over-exposure. “The greater the granularity of the data, the greater the understanding of risk, and the more effective we can make our reinsurance purchase”, Heale explains. “This doesn’t mean we do away entirely with the contingency… but we can be more refined in our purchase.”
Competitors quote high premiums for all properties in a postcode that has flooded, whereas RSA can give lower quotes for individual properties that have never been affected. “We were able to make flood insurance available to a wider range of customers”, notes Heale.
“Where before we would expect a risk assessment to be performed in, say, seven days, the response from the new system is pretty much instant, as in most cases no manual assessment is needed”, Heale observes. Automated risk assessment and batch processing free up underwriter time for more complex assessments. Heale is enthusiastic: “We have no reason to assume anything other than 100% confidence. It’s going to be fantastic.”
Handling major events
Some events cannot be planned for and stretch call centres and computer systems. When the Buncefield oil terminal exploded, Heale’s team modelled and estimated RSA’s loss within three hours; “Following seven months of actual physical assessment of the damage and loss adjustment, the number that we gave is still within 7% of the final cost”, Heale affirms. Before GIS, it would have taken a week or two to estimate a less accurate number. Furthermore, “Because the system helped us to gear up quickly, we were able to send an emergency response vehicle to the scene within a couple of hours”.
The Esri UK Insurance Platform can provide assurance to regulators and shareholders that RSA fully understands the risks it underwrites and complies with legislation such as Contract Certainty and Solvency 2. “I do believe that… the system may be able to assist us in our discussions with regulators around how effectively we are managing the risks in our portfolio”, muses Heale.
“The geographical mapping tools can also be used to identify ‘cold spots’, or areas in which we could write more business without affecting our accumulated risk”, Heale notes.
RSA has used Esri GIS for many years, and now plans to convert all postcode data into geocoded data and give web service access to underwriters outside the UK.
Heale summarises, “I guess the real ‘lightbulb moment’ for me was the realisation that it wasn’t the knowledge of topography, or of river flows, or of insurance, or of GIS that actually made the difference… but it is the combining of all those datasets with our GIS skill, our mastery of the insurance risk, of actuarial pricing, and of our capital management capability that has truly made a winning formula for us.”
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