Geospatial-Based Property Risk Ratings

Rising losses in the property and casualty insurance sector can partly be attributed to the increasing frequency and intensity of large natural disasters, as well as the movement of populations to regions more susceptible to catastrophes.

However, an often-overlooked yet significant factor is the lack of granular and accurate information about potential hazards -- and exposure to loss at every insured location.

From a risk/analytics perspective, it’s clear that the industry needs to improve its methods of evaluating, underwriting and pricing property risks -- and more precisely choose and price policies according to actual risk.

The root cause of the issue is the inadequacy and ineffectiveness of conventional, territory-based definitions and pricing methods. Insurers face the challenging task of striking a balance between having territories big enough for credible statistical analysis and small enough to encompass regions with uniform exposure to risk.

The limitations of territory-based rating can become a thing of the past as a result of substantial advancements in Geographic Information Systems (GIS) and Geospatial Artificial Intelligence (GeoAI) -- and the increased access to location-specific data and risk scores that these technologies can offer.