City at night with location pins glowing

Location Intelligence | Pitney Bowes

Precision underwriting or catastrophic losses?

Location master data management strategies are helping insurers understand exposures, reduce risk and increase profitability.

By Jean Sullivan, Vice President, Insurance

Large-scale use of location data is a cornerstone of the insurance industry. It touches virtually every aspect of the business, from risk assessment and underwriting to claims and customer acquisition. Insurance companies today have more location-based data available to them than ever — yet operationalizing that data across the business remains a significant challenge.

What companies want is accurate and complete data that gives them a reliable view of risk — for a single property, for an entire building or neighborhood, or as an aggregated view of risk across the enterprise. But what most companies we talk to today have is imprecise data based on an estimate of the actual location. Moreover, the data is trapped in siloed lines of business and disparate legacy systems, making a single version of truth about a property or a building extremely difficult to acquire.  

Harvard Business Review Analytic Services surveyed industry experts and analysts about the state of location intelligence data in the insurance industry. Their findings confirm what we are seeing in our work with clients — that the opportunities to reduce risk and increase profits by improving the accuracy of location data and managing it effectively are significant.

While every insurer can translate an address to a latitude and longitude, that alone is not sufficient to deal with the flood of new location information today.  First, that lat/long must be hyper-accurate — in many cases only a few feet of error can make a difference in risk profile. Second, insurers must be able to relate each property to a single, unique, persistent ID that can be used across data sets. With these capabilities, an insurer attains the ability to make error-free linkages across the organization with minimal processing time as well as the ability to layer additional contextual data onto that unique identifier.

The resulting insights about a property can impact use cases across the company. For example, we helped a company successfully pursue a strategy of insuring low risk properties in high risk areas in wildfire zones in California. By declining to write coverage on selected properties based on insights from an accurate location, plus wildfire data and underwriting expertise, the company avoided incurring a significant number of total losses. Of the properties it did insure, zero had total losses and claims paid were significantly below total exposure.

Or consider how evaluating cumulative risk in a single multiuse building like an urban high-rise depends on consolidating data across multiple business lines within a company — small businesses such as retailers and restaurants on the first floor, large enterprise commercial for the major chain hotel on the next 10 floors, and personal lines for the condos in the remaining floors. That takes location master data management (MDM).

Learn more about how precision accuracy and location MDM strategies are helping insurers understand exposures, reduce risk and increase profitability. Download Mastering Location Data: Close, But Not Quite There from Harvard Business Review Analytic Services in association with Pitney Bowes.