How External Data Is Revolutionizing Underwriting

Combining external data streams with internal analytics creates a comprehensive view of properties that legacy methods can't match.

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Inadequate data continues to plague the insurance industry, as exemplified by Hurricane Ian victims in Florida still battling underpayments more than a year later. With claimants left with no option but to sue, the Insurance Information Institute estimated that insurance companies are facing $10 billion to $20 billion in litigation costs.

This situation underscores the critical need for fresh underwriting data in the digital age. Reliance on legacy valuations and records has left insurers struggling to accurately assess claims and risks, while eroding customer trust. The exponential growth of digital data provides immense potential here, if harnessed correctly. Combining external data streams with internal analytics creates a comprehensive 360-degree view of properties that legacy methods cannot match. The streams also provide the opportunity to adopt innovations that enhance inspections, streamline processes and improve customer experiences.

Indeed, forward-thinking insurers are already embracing external data and applying emerging technologies like AI and digital twins to extract richer data insights and enable faster, more efficient services.

While tier one insurers might be able to address all these challenges within their own resources and capabilities, that leaves a swath of the industry looking for answers. These insurers must tap innovative technologies like AI while leveraging new data sources outside their walls. The solution lies in embracing external data partnerships.

The potential of the data explosion in insurance

Data is ubiquitous today. Weather data improves climate risk models. IoT sensor data provides real-time building occupancy and condition details previously unattainable. Even social media and online reviews give insights into property usage unthinkable just years ago. This data explosion has massive implications for insurers.

The use of external digital data streams is advanced. FinTech Futures put the size of the global alternative data market at $17.4 billion by 2027, growing at 40% annually.

See also: 5 Ways Generative AI Will Transform Claims

Profound benefits are already emerging for insurance companies ahead of the curve. A study has identified:

  • Hyper-personalization and enhanced customer experiences enabled by external data driving a 33% increase in identified lead improvement and placement.
  • External data solutions like quote prefill and risk profiling delivering 12x higher likelihood of converting prospects.
  • Book-of-business analysis identifying increased customer churn risk enabling a 59% improvement in retaining policyholders.

Insurers are already leveraging the trove of external data, alongside conventional analytics, to gain comprehensive insights with which to improve product competitiveness and workflow efficiency and experience.

  • USAA's acquisition of Noblr enables usage-based insurance (UBI) using real-time driving behavior and mileage data to create personalized pricing, enhancing USAA's ability to offer competitive insurance products.
  • The joint venture among AIG, Hamilton Insurance Group and Two Sigma resulted in the creation of Attune. Attune is a data-enabled platform that provides access to valuable external data from sources including public records, business operations data and financial data that can improve underwriting processes.

Satellite data: a revolution in property intelligence

One especially powerful external data source set to disrupt underwriting is satellite imagery.

Accessing accurate property data is still a huge problem for insurers. This data is often compiled from multiple sources (ranging from brokers and property managers to public records) and can be inconsistent or incomplete. As a result, customers often have claims rejected or only partially paid out, as the claimants in Southwest Florida have discovered. And insurers can be held liable for the difference in costs.

When combined with AI analysis, satellite data provides contemporary information that can be verified against visual evidence, rather than paper records. It can include property details like facade materials, construction types, occupancy details and roof geometry at mass scale. In fact, this data can provide detailed coverage for 99% of properties in developed countries.

For underwriters, satellite intelligence reduces in-person inspection costs by 50% on average and takes minutes rather than days to process. For claims teams, it enables real-time damage assessment and accelerated claims processing. And for brokers and their customers, it enables instant, automated quoting and more customized policies.

This data also mitigates premium leakage, enhances loss ratios, reduces under- and over-insurance and generally removes guesswork from the equation.

See also: AI and the Future of Independent Agents

The future belongs to data-driven insurers

Yet many insurers still depend on decades-old surveys and records for property data, potentially leading to underwriting and risk assessment mistakes. In the U.K. alone, 40% of commercial properties and 80% of households are underinsured due to poor property insights -- leading to denied or limited claims.

There is no longer any reason for these gaps. Through innovative data partnerships, insurers of all sizes can now access external data sources and AI capabilities that were previously only available to major carriers. These collaborations accelerate implementation and democratize access to advanced analytics, empowering insurers to leverage leading-edge data intelligence regardless of their scale.

External data and AI are no longer the sole province of tier one insurers -- strategic partnerships provide cutting-edge solutions to insurers across the market, fueling digital transformation through data. Data is the undisputed currency of modern insurance. Only insurers embracing partnerships and innovation will thrive. The time to unlock the black box of external data is now.

Jacob Grob

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Jacob Grob

Jacob Grob is chief revenue officer and data innovation lead at Tensorflight.

Grob has over 15 years' experience in the data, geospatial and insurance industries working with property and casualty insurance software and data analytics providers, including Maprisk and Corelogic.

Grob holds bachelor degrees in liberal studies and geography from the University of Wisconsin-Whitewater.

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