For realtors, it's all about location. It's also true that insurers can benefit from understanding the geographic dimension of their data.Writing flood insurance policies is one common way that insurers have applied geographic information systems (GIS), but a new report suggests there are other areas where the technology can be applied to benefit carriers.

"Using geography as a key to insurance information can yield efficiencies in many aspects of insurance," states a new report from TowerGroup, Needham, Mass. "When more data and information are made available to the mix in any insurance transaction, better decisions can be made, costs can be better controlled, and profitability can be increased."

Smarter decisions

Specifically, the report outlines how GIS systems can potentially be applied to sales and marketing efforts, underwriting and flood insurance.

For example, TowerGroup notes that insurers can use GIS, geographical data sources and demographic data to improve marketing analysis and the results of marketing campaigns. Such data sources as the U.S. Census Bureau's Topographically Integrated Geographic Encoding and Referencing provide demographics data and local tax assessments that can be used to estimate income in a particular geographic area, information that is beneficial for cross-selling and retention initiatives.

TowerGroup notes that GIS can be used to improve the accuracy of underwriting auto and homeowners insurance by accurately determining key auto risk factors such as the distance and the route a policyholder has to drive to work and auto theft statistics for work, home and garage addresses. For commercial policies, GIS can be used to determine the distance to fire hydrants, the location of the nearest floodplain, and windstorm risks.

"The ultimate goal is to get underwriters out of the day-to-day processes by using straight-through processing and analytics and get them to analyze their portfolios," says Deborah Smallwood, vice president of TowerGroup's insurance group and co-author of the report.

GIS technology can further enhance the underwriting results by determining whether a policy has been assigned to the appropriate rating territory. "Rectifying this type of policy leakage is tantamount to gaining a new stream of revenue since the carrier can use the information to collect the appropriate premium for the rating territory from holders of the miscoded polices," the report states.

Insurers increasingly are using GIS to respond to fires, earthquakes and other catastrophes. Insurers responding to the Florida hurricanes last year were able to quickly deploy adjusters to specific areas that were hardest hit. "In the aftermath of the Florida hurricanes, it was being used to find customers because so many street signs were missing," Smallwood says.

"GIS is still a fairly new technology, and insurers really don't understand the technology and how it complements their data," she adds.

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