Product Focus – Escape of Water

perils and escape of waterEscape of Water (Non Freeze) claims currently account for around 25% of domestic claim costs, so having an accurate measure of escape of water risk is vital for insurers.

The cost of insurance claims resulting from escape of water claims such as plumbing equipment failure, and burst pipes and leaks can be significant.   Business Insight’s Escape of Water (Non-Freeze) model has been designed to predict the relative risk of escape of water claims across the UK.

Working closely with a number of insurers and data partners, Business Insight has utilised PhD level mathematical modelling to analyse highly detailed datasets against historic claims patterns to estimate risk by postcode. Over 100 million data records, 26 million properties, 1.7 million postcodes and heavy computing power has resulted in the most detailed project undertaken into this type of insured peril in the UK insurance industry.

Comprehensive information relating to property, the typical demographic make-up of the street and other key predictors has been combined to more precisely calculate the risk of an escape of water claim.  The output provides insurers with a deeper insight into the risk of an escape of water claim for enhanced risk selection and better pricing accuracy.

The model has been independently validated by a number of insurers against their experience data and has shown a high degree of predictive discrimination and potential for use as a rating factor.

Benefits include:

  • Better assessment of risk by location.
  • More precise pricing and rating.
  • Gaining insight into postcode areas where you have no experience data.
  • Discovering where you need to modify your rates to reduce exposure in higher risk areas and to optimise your profitability.

To find out more, please contact us on 01926 421408.

Why weather data matters

The insurance industry has been incorporating historical weather patterns into underwriting and pricing models for years.

How far back do weather records go? The Met Office use 1914 as the official start of the records of weather data as this was when observation stations became more uniform in the way they collect data but they do have records dating back to c1200.

The England and Wales Precipitation series, which measures rainfall and snow, goes back to 1766.  Some weather stations have been collecting data since the 1800s.  We asked our colleagues at Weathernet for a copy of the first weather entry they have and the earliest entry they have dates back to 11th March 1872.

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Information on rivers and peak flows has only been collected for decades rather than centuries and the first surface water yearbooks were published in the 1930s by the Inland Water Survey.

There are a number of challenges in identifying trends in the frequency and severity of extreme weather events and these include the relatively small amount of historical data available.

If we only have reliable records for the last 100 years or so, should we be concerned about our capability to understand and forecast extreme weather events like those of the recent December floods?

The rainfall in December produced a new record of 341.4mm at the Honister Pass rain gauge, Cumbria which was more rainfall in a day than an average month. This has been estimated at over a one in a 1,000 year event.  However, we keep seeing records broken so clearly a more accurate assessment of the return period or frequency of extreme events is required.

We also need to have accurate estimates of extreme weather, particularly rainfall, to ensure the right level of investment is put into the design of flood defences. In the recent flooding in Carlise, defences built to withstand events up to a 200 year return period failed.  This is only 10 years on from the previous flood event and after a £45m investment in a new flood defence scheme.

So is climate change a factor?
There has been an increase in storminess in recent years and we do seem to be in a flood rich era.  Many scientists accept that climate change is a contributing factor to the pattern of weather we have been experiencing in recent years.  A recent study by Oxford University and the Royal Netherlands Meteorological Institute has calculated that climate change has made the recent flooding events 40% more likely.

So in summary, weather data is really important in understanding, validating and helping us to assess natural perils risk.  There are a lot of really useful risk models and data sources that can give a detailed insight into weather-related risk, particularly flooding.  However, we still have someway to go in getting a fuller understanding of more extreme events, how they will impact us going forward and what role climate change has to play in all this.

 

Business Insight exhibit at Flood Risk & Insurance Event

The GeoInformation Group & Business Insight are working together to bring insurers sophisticated data and solutions to help them better understand the location, physical properties and structure of buildings across the UK.

Combining the extensive experience and feature rich data resources of The GeoInformation Group with the market leading analytical modelling of Business Insight has resulted in a compelling, innovative solution for the UK Insurance Industry.

The solution combines accurate, detailed and reliable data with best of breed perils databases to provide high resolution predictions of the risk of theft, fire, freeze, storm, subsidence and flood for both residential and commercial insurance.

Both Business Insight and The Geoinformation Group will be exhibiting at the Flood Risk & Insurance 2015 Conference which takes place on 29 October 2015.  Find out more here.