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Dec 1, 2005

Geographic Information Helps Insurers Manage Their Risk

In order to more accurately assess their risk in insuring homes, insurance companies are increasingly turning to location technology to help. The busy hurricane season as well as wildfires in California has prompted more insurers to look to technology to help them accurately asses their risk. According to MapInfo, more than 85% of insurance data has some location component.

In the past, insurance companies gathered information on earthquakes, windstorms, lightning, floods and other factors in order to decide whether or not to write a policy. The approval process was slow and less than accurate.

As the Insurance Networking News reports:

The advent of location technology, however, is providing insurers with the tools necessary to more accurately underwrite and rate homes in high-risk areas.

"If someone wants to buy a home in an area that is a wildfire risk this year-based on current conditions-the insurer can know that immediately-because wildfire data is now kept in real time," says Chad Hersh, senior analyst in the insurance practice at Celent, LLC, a Boston research and advisory firm.

One company provided location-based data is ISO. No longer using just zip codes, the new technology geocodes the location of the house, allowing insurers to base their underwriting decisions on such information as the quality and location of the fire department, the availability of the water supply, the proximity to areas susceptible to brush fires and other hazards, all in real time. The News quotes Chad Hersh, an analyst at Celent, LLC, as saying, "... you can actually know that this month this home is a particularly high risk and you may not want to insure that risk."