GPS maps insurance market

GPS-based systemallows RSA to view areas' various crime risks

Insurance companies are relying on GPS-based systems to simplify processes, but the technology has yet to overcome integration and data security challenges.

Satellite-based positioning technology can be used to analyse client data in areas such as risk assessment, premium pricing and marketing and customer support.

Insurance group Royal & SunAlliance (RSA) is using geographic components to comply with reinsurance regulations and support its underwriting.

However, there are also integration issues, as assimilation with other underwriting systems is key to RSA’s geographic risk management platform strategy.

The system, in use since last year, allows RSA to identify policyholder locations and build models that provide a view of the risk of arson, crime, flood and subsidence events.

Functionality provided by the Experian QAS system also ensures that the insurer does not already have too much business in one location, as limits defined by reinsurance arrangements determine the number of contracts that can be agreed within a
given area.

“Knowing where customers are also helps us to assist them in the event of disasters such as summer floods,” said Rob Osment, RSA’s technical manager at the geographic risks assessment unit. “We can establish the scale of the response and work to help our customers as quickly as possible.”

But Martha Bennett, research director for financial services at analyst Datamonitor, expressed concerns.

“The way the geographical data is presented and the platforms it is going to connect with must be taken into consideration,” she said. “Companies may want to use the data for other software in areas such as customer services and renewals, so integration must be carried out with caution, as completely standalone outputs could create issues such as having to do manual lists and manage duplication.”

There are also concerns about how data is managed.

“When companies are managing risk of crime related to a property location, wrong use of data could have an adverse effect, such as affecting house prices,” said Bennett.

GPS-based systems have the potential to provide stronger forecasting capabilities than some of the current rating variables, but suppliers will need to mitigate issues related to inaccurate data.

“The uptake of that technology is also related to its capacity to provide underwriters with an ability to quantify risks, as insurers are trying to keep their costs down. But that depends on the cost of the system and how much value it provides,” said Bennett.