Why do so few insurers use GIS?
Most insurers are grappling with the consequences of a soft market and increased financial volatility. With trust levels at their lowest in over 50 years, insurers who do not fully understand the risks they are writing face a tough future. The property landscape has changed dramatically, and credit markets remain tight. More uncertainty is introduced every day as globalization, climate change, and ever-moving patterns of land use, crime, and arson alter the geography of cities forever.
Insurers have always believed that they had the tradecraft and analytic knowledge to meet these challenges. The performance of the industry as a whole since 2001 has proved them wrong. Insurers need to apply analytic tools that can differentiate market gaps and potential exposure of hot spots at a more granular level than the postal or ZIP Code level they rely on today.
You couldn't imagine navigating around a city without access to street-level detail, yet most insurers are happy to try to balance their portfolio and manage risks without the same level of understanding. GPS is a no-brainer. It gets you where you need to be, quickly and easily. For the most successful insurers, a GIS is the "business GPS"—getting them to the right destination with the least cost in the shortest time.
With GIS, insurers gain a fresh appetite for risk management and greater transparency in underwriting, helping them more accurately say no and more profitably say yes. In today's highly regulated and risk adverse economic climate, this might just be the difference between success and failure.
Does geography really help insurers understand risks better?
A lot of geographic information can be used as a marketing tool because not only do you know where your exposure is, you know where it isn’t. So you can look at parts of the country where you are least exposed. This is often overlooked — our industry always focuses on the protection part rather than business development. This needs to change.
Granular GIS is the foundation of effective underwriting and marketing. The insurance industry is slowly coming around to understand what this means.
The overwhelming feedback we got from private email suggests that the industry is well aware of the value of GIS and is looking for geoextended not geocentric solutions. This requires software platforms and solutions that don’t change the workflow and back-end business processes. The benefits come from the decisions made from applying the analytical and integration capabilities to insurances systems not GIS itself.