Risk Management, Insurance and GIS
Geography is a critical factor in risk estimation
Executive Summary
Many geographical factors affect the risk associated with an individual insurance customer (e.g. for automobile risk: speed limit, steepness of slope, and susceptibility to flooding of streets likely to be traveled by a customer). Multiple geospatial datasets may be required to assess the extent that geography affects risk estimation.
Insurance companies require statistically sound and validated rating integrity tools. To enhance its offerings to the market and meet specific project commitments, insurance companies can augment risk estimation models with location-based and geographic data. For example, an insurer can combine a layer of existing insured properties with a layer showing proximity to high schools or youth centers. If a claim actually occurs, a map can be added to the same reports and distributed to field agents who can then more easily locate potentially damaged properties.
GIS and Risk Management
Location-based and geographic data permeate insurance data, (e.g. addresses, zip codes, and weather zones). In fact all of the data that the industry works with has a fundamental geographic component - an address for the customer being insured. Since the process of risk management can involve analyzing huge volumes of spatial and non-spatial data in a fast and efficient manner, use of GIS functionality within the overall framework of a risk management software application provides many benefits
GIS in Underwriting
The process of underwriting involves developing a suitable insurance policy and its pricing. GIS can be used as an interface and analysis tool to the required spatial data: the location coordinates, the risk profile, and the guidelines specific to different regions. This information can be used by the underwriters from anywhere within the organization.