P/C Carriers Now Can Look to the Cloud for Location Intelligence-Based Underwriting
If property and casualty insurance underwriters could peer into the future to anticipate these events, know their severity and understand exactly how each insured property would be affected, they could price risks accordingly--a major business success. Of course, no such underwriting "crystal ball" exists.
Instead, says Bill Sinn, Strategic Industry Director, Insurance Practice, at Pitney Bowes Business Insight Inc., traditional underwriting means time-consuming searches for meaningful data from individual policyholder risk characteristics--the types of information that will hopefully improve the odds of distinguishing good risks from bad, and enable the accurate pricing of each risk. At the same time, pressure to grow profitably--whether in a soft, flat or robust economy - also can negatively affect the underwriting process.
So, how can insurance carriers develop solutions and enhance business processes that improve their chances of making an underwriting profit in both hard and soft market cycles?
Rather than looking for a crystal ball, Sinn says, a better place is to look to the cloud, specifically cloud computing. PBBI, a division of the $5.6 billion dollar mailing solution giant Pitney Bowes Inc., recently launched Underwriter's Location Profiler, a powerful new cloud application hosted on Force.com. Underwriter's Location Profiler, initially designed for property and casualty and general insurance carriers worldwide, provides the ability to automate the location-based portion of underwriting workflow with a number of location-based assessments, based on proximity to a wide variety of risks.
"Sustained superior underwriting performance requires precision, insight and responsiveness. Insurers are putting a high priority on improving the capture of data and risk information. They are enhancing underwriting by ensuring that risk assessments are more judgment than luck," Sinn explains. "With our cloud-based Underwriter's Location Profiler, we believe we offer the next generation of tools to improve the underwriting process based on location and data."
Among its advantages, says PBBI's Dean Wiltshire, Global Product Manager, Hosted Solutions, Underwriter's Location Profiler easily integrates into existing underwriting workflows for both new business underwriting and policy renewal processes while handling exception processing, single address lookups, and batch processing of files.
"In addition, this solution includes location-based book-of-business analytics, and competitive rating territory information and pricing," Wiltshire explains, adding that the application improves quality and productivity of new property quote submissions by providing real-time risk assessment of locations without the additional burden or cost to IT.
The underwriting solution provides insurers with the flexibility to easily plug and play Location Intelligence and analytics into current business applications, such as policy administration, underwriting workstations and agent portals.
"This is an excellent example of the next generation of insurance services in the cloud," says Deborah Smallwood, industry analyst and founder of Strategy Meets Action, a Boston insurance advisory firm. "There are infinite possibilities for capitalizing on location intelligence in the insurance industry, and cloud-based computing really opens this avenue up for small to mid-sized insurers, but also can be used effectively by larger carriers as well."
Cloud computing--also known as Software-as-a-Service (SaaS), hosted, or on-demand computing--has changed how applications are built and how business functionality is delivered. For many insurers, it could be the ticket to salvaging the technology investments they have made--and enabling new location analysis emerging capabilities--without an additional broad outlay of capital, says Sinn.
In cloud computing, a third-party provider hosts, manages and maintains applications and associated data on behalf of its clients, who access the software remotely and securely via the Internet. Unlike outsourcing, cloud computing only changes the way in which solutions are delivered, not how or by whom they are used. Dynamic applications such as location intelligence are ideal for cloud computing platforms, where data always changes and the data capacity must be able to scale upward.
"It's not difficult to see why cloud computing is gaining a foothold in insurance." Smallwood says.
Wiltshire explains that the use of geospatial information systems (GIS) has increased pressure on already-strained in-house IT resources. At the same time, the sheer volume and growing complexity of location data and images necessitate increased capacity and bandwidth. IT personnel are stretched thin and cannot spend hours loading updated data files into on-premise systems. Given these conditions--and users' heightened demand for speed and performance--many organizations are bogged down by obsolete data, inefficient workflows and costly solutions.
According to Sinn, while all industries can benefit from cloud computing, the approach is particularly well suited to risk analysis and pricing--areas in which applications are complex, costly and increasingly in demand.
PBBI has identified six characteristics that make the cloud-computing model the ideal delivery method for Underwriter's Location Profiler, including:
-- Increasing volume and complexity of risk data: Data continue to grow, and currently 80 percent of all insurance business data has a location component. Also, geographic risk data is layered: addresses and Zip Codes in spreadsheets, for instance, are linked to complex map files. Geographic data is also in constant flux as Zip Codes change, roads are renamed, or new risk data sets are developed. Making a seemingly small change--like updating the addresses included in a specific rating territory--impacts not only pricing but exposure accumulations to which that data is linked. The result is an intricate web of ever-changing information that could easily overwhelm traditional computing resources and IT support personnel.
-- Cost efficiency: Startup costs for implementation would have been an insurmountable barrier for most small and even midsize organizations. Cloud computing, however, has changed the rules of the game. In most cases, organizations subscribe to cloud-computing solutions under "pay-as-you-go" terms based on flat fees or system usage. No capital investments in hardware or long-term software license agreements are required, making the model financially viable for more companies. In addition, there are fewer servers to maintain, there is less data to manage and no need to support constant updates, backups and versions--all of which create savings.
-- Satisfying the growing demand for GIS technology: Cloud computing is flexible and scalable, meaning that it can be accessed by a limitless number of users. Organizations can easily expand and modify services without the financial exposure associated with in-house systems. Because of its flexibility, Underwriter's Location Profiler via the cloud also enables intelligent collaboration through 24/7 community computing--in any place, across every time zone.
-- The utility of mobile applications: Mobile technologies, including mobile apps and wireless communications, are creating many opportunities for innovation. Field-based underwriters can use mobile applications such as Underwriter's Location Profiler as they visit properties or meet with agents or customers. On site, they can use their mobile devices to access valuable risk data information from the cloud regarding any events affecting the property--like hail storms, flood data, fire station distance, for example--in real time.
-- Keeping up with the speed of innovation: GIS and Location Intelligence solutions are evolving so rapidly that internal IT organizations can easily be overwhelmed by the increased pace. Companies that want to lead the market cannot be constrained by long-term licensing agreements when new GIS technology and applications are available. Underwriter's Location Profiler users benefit from an ongoing stream of enhancements and upgrades, enabling them to respond to market opportunities quickly. Instead of waiting to receive and implement new releases, users simply log on and take advantage of every functionality improvement.
-- The mission-critical nature of underwriting applications: Organizations that choose cloud computing-enabled applications such as Underwriter's Location Profiler shift the burden of successful program deployment and management to the cloud-based solutions provider--the party with the most expertise in supporting the systems and software. Some organizations may initially be reluctant to entrust mission-critical data and technology to a third party; but in fact, leading cloud computing solutions such as those from Force.com can offer greater reliability, more secure environments, better privacy safeguards, and built-in redundancies that exceed in-house thresholds.
Most importantly, says Wiltshire, PBBI's Underwriter's Location Profiler delivers underwriting decision support, meaning carriers large and small can implement underwriting guidelines to determine if the risk should be rated low, medium or high based on the returned values.
"For insurance carriers, the move to cloud computing has been a gradual process," says PBBI's Sinn. "Migration is happening more rapidly, however, as companies see firsthand how this new environment is improving the delivery of Location Intelligence, and can improve underwriting results."
For more information about PBBI's Underwriter Location Profiler, it is available for trial at pbinsight.force.com/insurance (either click the "Tour" or "New User?" icon to request a trial account).
(The above piece is part of our continuing Insights series designed to highlight key products and services to our readers. This paid-for Insights was written and edited by Risk & Insurance®
on behalf of our marketing partner. Additional Insights can be found on our Web site at www.riskandinsurance.com/.)
December 1, 2010
Copyright 2010© LRP Publications