Call it geographic information system technology, GIS, location intelligence technology, modeling-lite or whatever other terms are out there. We'll call it mapping technology, for simplicity's sake.
Mapping technology isn't simple stuff, though. It's a powerful tool that can help carriers and brokers manage and understand book upon book of exposure data. It can assist risk managers in wrapping their minds around the perils facing each of their facilities, their supply chain and every one of their employees. And to top it off, the technology can draw up pretty maps based on all of this information.
And, no, mapping is not another term for catastrophe modeling. Sure, CAT models produce pretty maps too, and mapping technology has picked up the not-so-flattering nickname "modeling-lite." The relationship between the technologies, however, is more complementary than competitive.
"The CAT modelers sometimes view us as competition, where, in fact, I argue that we're augmenting what they do. We don't want to become the geologists," says Craig Bedell, strategic industry manager at a leading mapping vendor, MapInfo Corp., whose products are used by all three major modelers, Risk Management Solutions Inc., EQECAT and AIR Worldwide Inc.
It is mapping technology, after all, that allows modeling programs to turn all that heavy scientific lifting--the 10,000 hurricane simulations and such--into images that insurers and risk managers can see on their laptops.
"In fact, AIR, RMS and EQE, and several other catastrophe modeling-type outfits, primarily base their solutions on underlying GIS technology," says Sean Fitzpatrick, commercial account manager for vendor ESRI, whose flagship mapping product is ArcGIS.
Bruce Norris, senior vice president at broker Hilb Rogal & Hobbs, goes so far as to call modeling "mapping-lite."
But the distinction between the two technologies is less who's better, who's best, as it is that mapping technology, on its own, is used differently than modeling is.
LAYERS OF QUESTIONS
One main lesson that came out of the Katrina modeling hullabaloo, when everybody blamed modelers for underestimating the loss levels of that storm, is that folks can't be too reliant on models.
As Tom Conway, a partner in Ernst & Young's Insurance and Actuarial Advisory Services practice, explains, insurers can get stuck in the mode of believing that they can only do "modeling with the model." They should instead take their model's output--or their raw portfolio information--and do underwriting and portfolio analysis on their own, he says.
Mapping technology is just the sort of tool needed for this independent human analysis, sometimes called thinking or intuition depending on whether it's conscious or unconscious.
Mapping works like "the overhead projector that the school teacher uses," says Bedell at MapInfo. Instead of cellophane layers placed down one on top of the other, mapping technology lays down data sets.
For instance, our first layer could be the boundaries of a city, the second the street network, the next each of our properties in that area represented by dots, and after that, layers for the area's flood zones, variations in rainfall, and so on.
And unlike the 2-D teacher's lesson, mapping is multidimensional. While it builds these layers, it also taps into underlying databases that house information from our portfolio, on the surrounding geography, and on nearby commercial and residential properties--anything we need to know about our policies, hazards and exposures.
All of this information can be graphically represented, melded together, updated instantaneously, on the map. Dots representing each property in our portfolio could be color-coded by occupancy type (say, office versus hotel), line of coverage (say, property/casualty versus worker's comp) or by amount of coverage. Different-sized dots could represent varying levels of exposure, skulls and crossbones nearby toxic waste sites, and jagged zigzags geologic fault lines.
There's no limit to the data layers that can be mapped, says Ryan Ogaard, managing director at Guy Carpenter & Co. Inc. and global leader of Instrat, the firm's actuarial and modeling group, which recently developed a hybrid mapping product of its own called i-aXs.
"If you want to know where manholes are, or power lines, or your agency force--anything you can identify by location you can put in there very easily and just overlay it with your exposure," Ogaard says about mapping's flexibility.
For some users, just seeing such a map provokes plenty of insight into their risk portfolios.
"It creates a level of curiosity that we want to ask more questions," explains Christopher Graham, chief information officer at Church Mutual Insurance Co., a leading provider of property/casualty insurance services to the religious institutional marketplace. "It's that when you see things graphically ... all of a sudden you start to become more creative in the questions you want to ask."
For other users, what does it for them is the technology's ability to transform these detailed maps and astronomical databases into manageable spreadsheets. All of the data behind the maps is also available in raw form for analysis and reporting. After all, visualization with pretty colors isn't always what's needed.
"If I say, 'What's our exposure 500 feet around Yankee Stadium?' not only can I see it visually on a map, but then I can push a link that says show me all of these locations in an Excel spreadsheet," says Kathleen Hurley at Greater New York Insurance Cos., who as assistant vice president of information technology is in charge of maintaining the carrier's MapInfo program.
Spreadsheets are crucial for GNY to grasp its exposure in New York City, she explains, considering that many of its locations there are lying literally right on top of each other in the same buildings.
Guy Carpenter's i-aXs risk management platform for insurers adds a third thought-provoking feature--a Google-like function for searching through all those dense databases.
With all of these capabilities, says Ogaard, mapping allows carriers to say, "Never mind how the CAT model would look at it." Instead, they can slice and dice their portfolio any way they want, ask as many questions as they want and get a "macro" view of their exposure--all to better underwrite their existing books and price new business.
Mapping power can even ease claims-handling for carriers. Graham relates Church Mutual's experiences during Hurricane Rita last September and the multiple tornadoes that ripped through the central United States this past March. The insurer deployed its claims teams based on its maps.
"We were at least able to go into that area and say, 'OK, did we have any exposure in there?'" he says. "It just gives us the opportunity to be proactive, and maybe call people to see if they're OK, as opposed to waiting for them to call us."
It's good for ulcer prevention too. "The mapping just tells us: can we sleep at night or not?" says Graham.
MAPPING THE FUTURE
If all of these uses sound tailored for insurers, reinsurers and reinsurance brokers, they are. Those folks are mapping vendors' major customers.
"It's a safe thing to say, just about everybody in the insurance industry is using some sort of underlying mapping technology," says ESRI's Fitzpatrick.
But insurance brokers and corporate risk managers are discovering uses for maps too. It's a recent trend, says MapInfo's Bedell, who estimates that fewer than 10 national brokers contacted his firm in the last year. Some brokers approached MapInfo because word got out another national broker had. One broker sought mapping technologies, Bedell says, because a client uttered something like, "I'm surprised you haven't been providing me this sort of service."
But brokers aren't just interested in competing with one another, or pleasing clients. Brokers appreciate mapping's power. Norris at HRH says mapping shows clients just how their risk is spread and complements what the loss-estimation models tell them.
"It helps us understand the risk," he says, "and helps our clients understand the risk."
Corporations have taken to mapping on their own as well, according to Fitzpatrick. They have been licensing ESRI's products more and more since Sept. 11, for anything from facilities management to targeted marketing.
For risk managers, Fitzpatrick sees mapping technology as especially useful for business interruption and continuity issues. Mapping would work, he says, for managing global supply-chain risks for a multinational. Or it could help to track employee movements on trips around the planet, or within rooms on given floors in given facilities. Come catastrophe, employees could then be more easily evacuated and redeployed to save life and limb, and cut down on B.I.
Basically, mapping technology could allow risk managers to think on their own, as it does with every other user.
"Part of your intuition as a risk manager for mitigating and avoiding risk is pretty self-evident when you start putting down layers of information about exposure," says Bedell.
MATTHEW BRODSKY is associate editor of Risk & Insurance®.
June 1, 2006
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