Verisk Analytics Acquires Business Insight

Verisk Analytics, a provider of property/casualty (P&C) insurance risk information, has acquired UK-based insurtech Business Insight.

Warwick-based Business Insight is a technology company focused on developing predictive analytical models for insurers in the UK and Ireland. The company provides risk models to support underwriting, risk selection, and rating for the commercial property, homeowners, and private and commercial motor insurance markets. Its analytic solutions help insurers benchmark market pricing, gain a deeper insight into risk, and identify geographies to support profitable growth.

Anil Vasagiri, Senior Vice President and General Manager for global property at Verisk, said: “For more than 40 years, Verisk has provided property/casualty insurers in the United States with robust data and analytics to manage risk. Business Insight’s focus on technology-based solutions for insurers, coupled with its highly sophisticated analytics, will complement Verisk’s industry-leading solutions; and its talented group of data and insurance professionals will strengthen our deep and expanding international team.”

Mark Harrison, Managing Director of Business Insight, commented: “Verisk’s vast data resources and analytical solutions for insurers present a tremendous opportunity for us. We look forward to working with our new colleagues to create more value for our existing clients as well as developing new analytics solutions for insurers around the world.”

Highlights of the MGAA Conference

Business Insight attended this year’s Managing General Agents’ Association (MGAA) conference which took place on 4 July 2017 in London.  The conference brought together over 600 MGAs, capacity providers, brokers and a selection of data and insurance software providers.

The theme of the event was ‘Evolution and Revolution’ looking at the MGA business model and focusing on how MGAs can continue to grow despite increased competition and regulation.

In his opening speech, Chairman of the MGAA, Charles Manchester talked about how far the MGA sector has come, the advances made and how it is now widely accepted as one of the most innovative and entrepreneurial sectors of the insurance industry.

The panel discussion was around the ‘InsureTech Revolution’ and what it means for MGAs.

Highlights of the conference can be found here.

Business Insight return to BIBA 2017

Business Insight will be exhibiting at BIBA 2017, the British Insurance Brokers’ Association annual conference in Manchester next week.

The conference, which features a panel discussion about planning for a post-Brexit future from the former Director General, John Longworth and Nigel Farage, is one of the Insurance industry’s most prestigious events.

The Business Insight team will be on stand B79 where we will be demonstrating our location matters software solution designed to assist insurers with underwriting, exposure management and risk selection. The solution combines state of the art risk mapping technology with the best of breed perils and geodemographic data to provide insurers with interactive maps displaying property location, risk, perils, policies and claims for a deeper, more powerful insight.

 

Flood, building on flood plains and the profile of those at risk

It is estimated that there are currently 1 in 6 properties or 4.7 million properties in Great Britain at risk from flooding, with 2.7 million properties at risk from flooding from rivers and sea alone.  Between 2001 and 2011, around 200,000 new homes were built on land that has a significant chance of flooding, either from a river or the sea. During the 1990s, this figure was even higher as there was less focus on flood and no obligation on planners to carry an analysis of flood risk at the time.

After the devastating effects of last winter’s storms and the subsequent costs to the insurance industry, building residential properties on flood plains continues although admittedly not in the same volumes.

Recent figures obtained by the i newspaper under the Freedom of Information Act show permission has been given to build more than 1,200 new homes on flood plains despite official objections from the Environment Agency about the risk of flooding on such sites. With all the publicity and available data relating to flood risk, it does seem slightly unbelievable that construction even at these levels is allowed to proceed, or at least without an obligation on builders to ensure that properties are built to be flood resilient.

New housing built in areas thought to be protected by flood defences may also be more at risk than first thought. Flood defences are built to withstand a certain magnitude of event, e.g. a flood with an estimated return period of 1 in 200 years, yet the underlying techniques modelled from relatively small data samples are based on extreme value theory which is sensitive to the underlying assumptions. I know there are still some people in senior roles in the world that are sceptical about climate change, however it does undermine the accuracy of these models and mean that defences may be more vulnerable than when first built or constructed. A good recent example being in Carlisle which flooded in 2005 (1925 homes and businesses) with flood defences that were breached. The defences were improved at a cost of £38 million yet these failed again in 2015 following a more extreme event than had been considered in the planning.

Profiling those areas hardest hit by flooding
We used our geodemographic risk profiling tool Resonate© to analyse the demographic profile of those affected by the Winter floods in 2015 in Carlisle and areas of Cumbria.   Our analysis revealed that there was an over-representation of properties flooded from working class and disadvantaged rural areas across the distribution of those hit.

Further analysis of these areas revealed a large number of properties flooded were from the Resonate lifestyle group ‘Rural & Village Survivors’ and those worst affected were predominantly from ‘Blue Collar Heartlands’; which are characterised by blue-collar workers in pre-war terraced properties where the proportion of terraced properties is almost thirteen times the UK average percentage. There is a high proportion of this type of neighbourhood in Carlisle.

Looking at all the areas across the UK that have a high risk of flooding does reveal that there is an over-representation of older, disadvantaged and more vulnerable neighbourhoods. In the future, we will no doubt continue to see more occurrences similar to that of Carlisle with poorer and more deprived neighbourhoods being disproportionately hit.

Conclusion
As long as there is still a demand for new houses, building on flood plains will continue. There is an increased demand for new housing particularly in the South East in areas where flood defences do exist, though climate change may limit the level of protection envisaged when some of these defences were built. A geodemographic analysis of the make up of the high-risk flood areas is quite startling – higher volumes of older, more disadvantaged and more vulnerable members of society dominate.

This highlights the important role that insurance plays and how the availability of affordable flood insurance for everyone is essential.  The introduction of Flood Re goes some way towards offering flood-prone properties a degree of cover but does not yet guarantee affordable insurance for everyone. The Government will need to put more investment in maintaining and improving flood defences and will need to look at helping make properties in the highest risk areas more resilient to damage from flooding.

The insurance sector and GDPR implications

Technology is connecting us in ways not seen before. Over a third of the world’s population use social media platforms such as Facebook and there are currently more mobile devices than people on the planet.  The avalanche of data being created not only brings with it analytical challenges to find value but also concerns relating to privacy, who owns the data we generate and a perceived over-reliance on automatic decision making.

The EU’s General Data Protection Regulation (GDPR) due to come into effect in May 2018 is an attempt to address some of the concerns and brings considerable change for European-based organisations in terms of capturing, processing and using personal data. Some of the changes might be viewed as draconian and could have a major impact on the use of data in the insurance industry.

Personal data is defined as “any data that directly or indirectly identifies or makes identifiable a data subject, such as names, identification numbers, location data and online identifiers.”

Designed to improve protection for consumers, the new legislation focuses on how personal data is collected, processed and how long it is held for and includes more obligations for transparency and portability.  Under the new rules, breaches must be reported within 72 hours and organisations face tougher penalties for non-compliance which could be up to 2% of global turnover or up to Euro 20m.

Consent to process the data
Insurance by its very nature involves collecting large amounts of personal data on customers. Under the new regulations, organisations will need to show how and when consent was obtained for processing the data.

Consent must be explicitly obtained rather than assumed and it needs to be obtained every time it is used for a specific purpose.  This means that data collected in one area of the business cannot be used in another area unless explicitly agreed upfront by the customer.

This could be a problem for insurance companies as often data collected at underwriting and claims stages is then used for a variety of different purposes including fraud prevention, marketing, claims management and risk profiling.  Also, some of the individual data collected via credit agencies or aggregators and then reused for another purpose such as the real-time rating and pricing of insurance could potentially fall into this category.

Time limits and erasure
To ensure that data is not held on to for any longer than necessary, use of personal data should be limited to the specific purpose for which the processing was intended.  This change is likely to impact the insurance industry which up to now has sought to hold on to personal data for as long as possible to maximise potential use.  For example, data in relation to historical claims experience.

Customers will have the right to demand that insurers delete their personal data where it is no longer required for its original purpose, or where they have withdrawn their consent.

Right to data portability
Individuals will be able to request copies of their personal data to make transferring to another provider easier. The regulations specify that the data needs to be in a commonly-used format.  This might be problematic for insurers and intermediaries where data may be held on separate systems or in different formats.

Profiling
The GDPR provides safeguards for individuals against decisions based solely on automated processing which includes ‘profiling’. Profiling is defined as “any form of automated processing of personal data consisting of the use of personal data to evaluate personal aspects relating to a natural person, in particular to analyse or predict aspects concerning that natural person’s performance at work, economic situation, health, personal preferences or interests, reliability or behaviour, location or movements.”

This new right is significant to the insurance industry as the underwriting process relies heavily on the pooling of information, building generalised models of risk to estimate future claims propensity and the profiling of individuals.   There are also other areas where decisions are made based on processes that are automated including claims analysis, fraud prevention and marketing.

Exemptions
The right does not apply to profiling using personal data if any resulting decision is deemed as necessary for entering into or performance of a contract between you and the individual.  The GDPR states that the contract needs to be between the data controller and the data subject. It is not clear about what happens when it concerns the processing of a third party’s personal data. Many insurance policies involve the processing of a third party’s personal data, in the form of a beneficiary under an insurance policy, for example, a second driver under a motor policy.

The other exemption is if the data has been anonymised – as this is no longer classed as personal data because the person cannot be identified from the data itself.

As far as profiling activities for underwriting – this is likely to be permissible as it can be considered necessary for the performance of a contract.  However, profiling for marketing purposes will not be exempt.

How does the Regulation affect the use of big data?
The process of combining large amounts of data from disparate sources and analysing it by automatic or semi-automatic means to spot trends and find hidden patterns and anomalies has a number of benefits for the insurance industry.  These include a greater understanding of risk across a book of business, more accurate pricing and improved competitiveness.  Data providers such as Business Insight are all undoubtedly giving GDPR some thought and building in technology to ensure their data products will be compliant, or at least they should be.

Business Insight
At Business Insight, we invest a significant amount in research and development every year as well as looking to continually future proof our products.   We use a range of different postgraduate analytical, statistical and mathematical techniques in researching and building models from large data sets which help guard against inaccuracies and errors.

We build models from data that has already been anonymised using various anonymisation techniques such as Bayesian Inference Swapping.  We have also been developing methodologies and IP to improve the accuracy and robustness of our perils risk models as well as ensuring compliance with the forthcoming GDPR legislation.  Our next generation of perils models and solution will be unveiled in the Summer.

Challenges ahead
In summary, the GDPR brings with it quite a few changes and challenges to the way data is collected, processed and stored.  Insurance organisations should be taking the time now to review their data management practices and systems to ensure compliance.  New technologies emerging will only serve to increase the pace of data generation and collection.  A lot of thought will need to be given by companies to ensure they remain compliant in terms of what they currently do and new solutions they are thinking of implementing.

In terms of the application of GDPR to big data, there are going to be obstacles to overcome as the legislation will force more of a balance between the potential benefits of analytics and protecting an individual’s right to privacy.  This could have a big impact in some areas and limit some of the analysis currently undertaken.  Whether Brexit eventually results in some of the legislation being softened remains to be seen, though with GDPR taking effect in May next year you will need to start thinking about the implications sooner rather than later.

Location Matters – the next step forward for underwriting UK property insurance

The increasing challenges faced by insurers include driving business growth in a highly competitive market and ensuring customer loyalty.  Remaining competitive involves optimising underwriting performance, an in-depth understanding of exposure to risk and more accurate pricing. What if there was a tool that could help you do all this?

Location Matters© is Business Insight’s new powerful visualisation and risk mapping tool that gives insurers a unique real time view of perils risk exposure by location.   Using the latest mapping technology, it is an extremely powerful visualisation and decision tool, combining market leading property risk models and demographic data into a single, easy to use, affordable system.

Through interactive maps displaying property location, risk, perils, policies and claims data, Location Matters© is designed to help insurers with underwriting decisions at point-of -sale as well as accumulation and exposure management.

Property risk is dependent on a range of factors linked to location; including the local environment, the types and construction of buildings, local crime rates, the demographic make-up of the area and physical hazards such as flooding or storm. By viewing and analysing customers against hazard data by location, underwriters and pricing analysts are able to have a deeper understanding of risk exposure, have insight into accumulations of risk across their entire book of business and as a result, more profitable risk selection.

Location Matters© is the next step forward for underwriting UK property insurance.  It brings together the best of breed perils and geodemographic data to visualise risk at property level and allows an underwriter to log-in to a web browser from any location and interrogate a postcode (or address) to gain a deeper understanding of geographic risk and the make-up of the local area.

Being able to visualise risk at such a granular level provides a greater insight and accuracy for underwriters but also helps strengthen your market position with a more in-depth view of the risk price as you write the business.

The risk mapping software also has a number of other benefits.  For marketing departments, these include having an accurate and in-depth understanding of their target market to generate new pipelines and a clearer view of where to focus their marketing campaigns.  For claims departments, it can be used to assess the validity of individual claims and also to prioritize claims handling resources which in turn helps to strengthen customer loyalty by focusing efforts on legitimate claims and improving the customer retention rate.

Location Matters© – for a more profitable risk selection and greater exposure management.

Find out more here

5 key benefits of data enrichment for the Insurance Industry

resonateData enrichment provides both insurers and brokers with an opportunity to leverage the vast amount of information they already have and combine it with external data sources to improve business acquisition and enable them to more accurately assess and price risk at the point of quote.

In the past, insurers and brokers had little choice but to rely on information collected at the point of quotation, most often provided by the proposer.  But now with increasing levels of new business being shopped for and written online, there is access to a wealth of public and private data which includes data relating to the individual, their location, property, demographic and lifestyle information.

This data can be used to try and predict customer behaviour, analyse trends, uncover new patterns and improve risk exposure.  Real-time data validation at the point of quote allows additional facts relevant to the risk to be discovered. This has a number of key benefits for insurers and brokers which include:

  1. Increased fraud detection rates

Insurers are experiencing unprecedented levels of application fraud activity. ABI research shows that in 2014 insurers uncovered 212,000 attempted dishonest applications for motor insurance, which is equivalent to just over 4,000 every week.  Statistics show that drivers who lie on their initial application are 66% more likely to make a claim in the future, so the more focus insurers and brokers can put on their initial assessment of drivers, the better.  Patterns, trends and anomalies can be spotted quicker and costs savings can be made by earlier assessments of fraud and identifying early cancellation cases.

  1. Improved competitive position

Data enrichment helps to provide insurers with a single customer view by combining public and private data with quote intelligence.  Insurers are, therefore, able to more accurately assess their customer base and be more selective in terms of the risks they want to underwrite. Thus avoiding poor performing risks and more easily identifying their best customers and those with the highest lifetime value for improved profitability.

  1. Enhanced customer loyalty

Data enrichment can provide insurers and brokers with a richer, deeper understanding of their existing customers. Adding valuable business data to individual records in your database can transform your customer data into customer intelligence. A wider knowledge of your customers’ behaviour and lifestyle means that products can be specifically tailored thereby enhancing customer loyalty and retention.

  1. Greater cross-selling opportunities

A better understanding of your customers leads to more relevant targeting and more opportunity to cross-sell complementary products.  By verifying the customer is who they say they are at point of quote and assessing their credit worthiness, those customers with a higher propensity to purchase add-ons can be identified.

  1. Reduced costs in settling claims

The claims process is time-consuming and demands a lot of resources.  Assessing the propensity of the customer to fulfil their credit commitments at application stage, means that scrutiny of the data at claims stage is reduced, enabling claims to be dealt with quicker, requiring less time and resources to be spent in settling claims and ultimately improving profitability.

The future of data enrichment
In today’s technologically driven society, new ways of exploiting data to gain competitive advantage and new data sources will always be found. Insurers will continue to embrace new data sources and the greater visibility and insight this brings.

Business Insight has a range of products designed to support quote enrichment, risk selection and claims validation as well as the pricing and underwriting of insurance.  We have recently built our own data hub and will be launching the next generation of high resolution property level geographic risk models next year. This will allow users access to more accurate perils information at the point of quote. More details to follow on this in our next newsletter.

Insurance and fire risk – 350 years on from the Great Fire of London

fire riskSeptember 2016 marks the 350th anniversary of the Great Fire of London.  The fire, which started in the early hours of Sunday 2nd September 1666 on Pudding Lane and lasted several days, devastated London.

Over 13,000 buildings were destroyed in the fire, including many homes, commercial buildings and other well-known landmarks such as St. Paul’s Cathedral, the Royal Exchange and Newgate Prison.  Miraculously, there was little loss of human life.

As the long and arduous task of rebuilding London commenced, to try and ensure that London would not face such devastation from a fire again, a number of changes were made to laws and Parliament set up the Fire Court.

The Court was established to settle differences arising between landlords and tenants in relation to burnt buildings and decide who should pay.  A year later, physician Nicholas Barbon set up the first insurance company, the Fire Office, whose sole purpose was to insure houses against loss due to fire.

The ABI have calculated that if that particular area of London were to be hit by a similar fire today, repairing the damage caused would cost somewhere in the region of £37 billion.

The insurance industry has come a long way since 1667 but is still dependent on a proper understanding of risks. With ABI figures showing that the average claim for domestic fire damage is around £11,000 and the average claim for commercial fire around £25,000, fire is an important peril for insurance companies to consider.

To help insurance companies better understand their exposure to fire claims and likely accumulations of risk in urban locations, Business Insight has a range of data enrichment models and a mapping and accumulation management application called ‘Location Matters’. The Fire Insight data enrichment models help to assess the relative risk and variation of deliberate and accidental fire claims across the UK; both for commercial property insurance and for home insurance. The models utilise highly complex computer algorithms and vast quantities of data relating to residential and commercial property, the local environment and the demographic make-up by area to estimate risk more precisely.

Accumulation management with ‘Location Matters’ enables an insurer to monitor policy accumulations by location to gain greater insight and understanding of risk exposure, allowing insurers to answer the question ‘should another Great Fire ever happen in London again, what is my probable maximum loss’?

To find out more contact our sales team on 01926 421408.

Brexit or Bremain? The results are in…

After months of debating and campaigning on both sides, the results are in and 52% favour leaving the EU.  This was actually something we predicted over a week ago when doing some analysis using our Lifestyle geodemographic classification system, RESONATE©.

The Battle

It was a closely fought battle between the Remain and Leave camps.  Earlier on in the year in February, Remain had held a consistent lead over Leave, with about 55 percent of support according to the polls.  However, the nearer it got to the big day, the more support for the Leave campaign seemed to be growing.  As the campaign progressed, it seemed that a number of factors would affect the result including the turnout, which way the 1 in 10 undecided voters would vote and the weather.

Our Poll

We conducted some analysis to find out which way people would vote and predicted a 53% vote to Leave.   We arrived at this figure by profiling every type of neighbourhood in the UK and each lifestyle category based on media reporting and analysis.  This was then scaled by the distribution of voters within each category in every street across the United Kingdom and Northern Ireland.

Our analysis indicated that the battlegrounds of undecided voters were concentrated in areas categorised as ‘Mature Families & Traditional Values’, ‘Wealthy Families in Village, Small Towns and Rural Locations’ and ‘Modern Families, Modest Means’.

The results

As we predicted by using RESONATE©, the result favoured the Leave campaign.  We put this down to a number of factors; firstly, the overall turnout was 72%, higher than the general election. Secondly, some of the areas that favoured Leave were traditional labour heartlands, ‘Blue Collar Heartlands‘ where the turnout was 80%.

We believe that this in the end was a deciding factor. The neighbourhoods more likely to vote leave outnumbered those likely to vote remain based on our database. With a very high turnout the result we predicted proved to be accurate.

RESONATE© is a classification of all households and streets across Great Britain and Northern Ireland and has grouped every neighbourhood into a number of similar categories based on a wide range of demographic, environmental, lifestyle and socio-economic data.

For more information about RESONATE Lifestyle & demographic data, contact us on 01926 421408.

BREXIT? A view on the result using RESONATE Lifestyle data

Brexit squareWith the Brexit vote about to take place this week we thought it would be interesting and also a bit of fun to use our RESONATE geodemographic classification system to give an indication of the likely result.

Looking at every type of neighbourhood in the UK we estimated which way each lifestyle category is likely to vote based on media reporting and analysis. This was then scaled by the distribution of voters within each category in every street across the United Kingdom and Northern Ireland.

The analysis seems to indicate that the battlegrounds of undecided voters are concentrated in areas categorised as ‘Mature Families & Traditional Values’‘Wealthy Families in Village, Small Towns and Rural Locations’ and ‘Modern Families, Modest Means’.

Targeted communications aimed at these neighbourhoods might have reaped better rewards for either side in their respective campaigns. The analysis predicted a 53% vote to Leave. Although a high turnout is expected, there will be variation across the geodemographic categories which has not been considered and also there will be some statistical error within this analysis. So it could still be a vote either way.

For more information about RESONATE Lifestyle & demographic data, contact us on 01926 421408.