Top 5 Geospatial Trends for P&C Insurance in 2024

Ecopia recently hosted a roundtable discussion of insurance thought leaders and geospatial data experts for candid conversations on topics that are top of mind across the property and casualty (P&C) insurance industry. The participants gathered to discuss the ideas, challenges, opportunities, and trends that are shaping the future of P&C insurance. Here are some of the key insights that came out of the conversation.

1. AI-powered geospatial data for P&C insurance

As the insurance industry undergoes a transformation driven by data and technology, it is no surprise that artificial intelligence (AI) and generative AI are among the biggest buzzwords in P&C insurance today. But while carriers recognize these are some of the most overused words in the industry, they also say AI is the key to unlocking the next generation of innovation in insurance. Specifically, AI is revolutionizing how carriers acquire and analyze geospatial property intelligence data, helping to address key challenges related to policy underwriting and pricing, claims, and master data management.

Policy underwriting and pricing

For P&C insurers, geospatial intelligence begins with the ability to accurately understand the number and location of individual buildings at a given address. To do this, carriers often use a geocoder to establish geographic coordinates and then layer relevant data to determine risk exposure. However, many geocoders face difficulties in accurately identifying the specific coordinates of a building associated with a policy, meaning an address may be assigned to a nearby property or even miles away from its actual location. This occurs because most geocoders use a parcel centroid method, where a geocode is placed in the center of a land parcel, which could include multiple buildings, each potentially containing numerous addresses. Alternatively, geocoders may use a street-segment methodology which provides an approximation of where a building is on a street, rather than pinpointing its exact location. An analysis by Ecopia AI (Ecopia) found that “industry leading” geocoders are accurate less than 60% of the time, as a result of using these methods. These inaccuracies can lead to billions of dollars of unaccounted for risk from underpriced policies. 

Fortunately, AI is playing a pivotal role in solving this issue. AI-enabled technology now leverages up-to-date geospatial imagery to create Building-Based Geocoding which produces latitude/longitude coordinates that correspond to high-precision building footprints and rooftop level geocodes. This enables carriers like Tokio Marine North America Services (TMNAS) to pinpoint the exact location of each insured building in their portfolio enhancing the accuracy of risk assessment and helping to inform pricing strategies and replacement cost estimates.

Claims

AI-powered geospatial data plays an important role in investigating and managing claims in P&C insurance. Data integrity issues from inaccurate geocodes or building footprints create challenges related to property valuations, replacement cost estimates, and more. This can result in the overpayment of a claim, exposing the provider to financial risks, or an underpayment, resulting in customer dissatisfaction and attrition. However, AI-based building footprints and rooftop geocodes empower insurers to efficiently respond to and address the validity of claims by determining a property’s location and how specific structures were impacted by a risk event on a per-building basis.

Master data management

Many insurance providers encounter data standardization challenges with different departments managing various data sources. AI-enabled technology can help carriers overcome these challenges, ensuring consistency and improving efficiency. For example, AI-based data creation makes it more feasible for building-based geocoding solutions to provide unique identifiers for buildings, parcels, and addresses so all departments can develop a single source of truth to fuel their operations.

2. Deepening insights with geospatial data

Regardless of AI, carriers are looking to leverage more geospatial data for deeper insights into the properties they insure and their risk profiles. The information that high-precision geocoding provides related to the location of individual buildings at addresses serves as the foundation for further in-depth analysis, but to maintain a competitive edge, P&C carriers agree they need extensive datasets to fuel comprehensive risk assessment, make informed decisions, and adapt to dynamic market conditions.

3D mapping

Building footprints and 3D building data are top of mind as they can enrich geocodes to deepen analysis for insurers. For example, Ecopia’s advanced AI-based feature extraction applies distinct characteristics, like height, for all buildings, bridges, and trees in the US. This more comprehensive understanding of the structure enables carriers to assess risks more accurately. Moreover, insurers are exploring the creation of a digital twin for the properties they insure, aiming to gain deeper insights, and they are turning to 3D data to achieve this.

Advanced property attributes

To enhance analysis, P&C insurance carriers are also increasingly incorporating property attribute data, gaining deeper insights into the physical structures associated with policies. For instance, details about a building's roofing material can be examined to determine hail resiliency. Similarly, analyzing factors such as the presence of leaves in gutters, which pose a significant fire risk, contributes to a more thorough understanding. High-precision property attribute data like this is top of mind for industry experts. By considering dynamic property attributes, carriers can tailor services more precisely to the specific features and risks associated with each insured property. This, in turn, leads to a more accurate assessment of risk and property value while considering contextual information that influences policy pricing, replacement cost estimation, and claims response.

3. Innovation in disaster readiness and response

P&C insurance carriers are focusing more and more on mitigating the consequences of natural disasters and actively contributing to prevention efforts that impact their bottom line. Last year alone, natural catastrophes (nat cats) caused approximately $250 billion in global losses. As the frequency and severity of extreme weather events continue to increase, carriers are deploying more sophisticated data analysis and modeling techniques to adjust their strategies. This shift is essential for adopting a proactive, rather than reactive approach to nat cats, gaining a better understanding of evolving weather patterns, and informing future decision-making to enhance overall resilience.

Emerging tech

The utilization of geospatial data and emerging technologies like SAR (synthetic aperture radar) offer deep insights both pre and post-catastrophe. For example, insurers can effectively manage wildfire risk by proactively incorporating it into the pricing and underwriting stages- a difficult task without comprehensive, accurate, and up-to-date geospatial data. A crucial step in this process is to verify that all pertinent risk factors are taken into account at the property level including proximity of fuel sources, wildfire history, types of vegetation, slope, and more. A proactive approach can also help inform pricing to be more nuanced in relation to changing risks. Learn more about the importance of high-precision geolocation in wildfire risk estimation here.

4. Policyholder engagement for risk mitigation

Prioritizing policyholder engagement is a key focus for experts in the P&C industry, specifically the pivotal role of policyholder education in supporting risk mitigation efforts. Educating clients on relevant risks not only supports risk prevention but also enhances carriers’ value proposition to clients. For example, communicating short and long-term actions to help policyholders secure their homes for severe weather events can promote preventive actions that can reduce the severity of damages during nat cats.

Consumer incentives

Determining how to incentivize customers to take action is an important piece of doing this. By sharing data-driven, property-specific insights with policyholders — such as identifying issues like leaves in the gutters and providing a list of local service providers for cleaning — or offering financial incentives for other proactive infrastructure measures, insurers can incentivize policyholders to enhance resilience and proactively mitigate risks. The return on investment (ROI) on risk mitigation efforts versus higher policy prices to deal with that risk after an event is an important analysis for P&C insurers to determine the viability of these actions.

5. Collaboration with governments for resilient infrastructure

Beyond the policyholder level, P&C providers are also advocating for investments in resilient infrastructure with different levels of government. This could include working with governments to promote new building codes that enhance structural integrity and address relevant nat cat risks. 

Government funding programs for property resilience

For instance, Alabama initiated a statewide grant program in 2012, overseen by the Alabama Department of Insurance, to assist in covering the expenses of retrofitting roofs on homes to meet higher building standards. This initiative was created after multiple insurers stopped issuing wind policies in parts of the state because of frequent loss claims after storms. The state collaborated with municipalities to integrate these requirements into local building codes. Partnerships like these between governments, states, and municipalities, are an important part of improving resiliency for communities in the future.

The future of P&C insurance

It’s clear that geospatial data is an integral part of insurance workflows that require detailed data about a property including underwriting, risk assessment, and claims management. However, in today’s dynamically changing world, the geospatial data used and analyzed in these workflows must be comprehensive, accurate, and up-to-date. Many carriers still struggle to source and scale the use of high-precision data for geospatial analysis, but AI and other emerging technologies provide new opportunities for innovation and resilience. 

AI-powered solutions, like Ecopia's Building-Based Geocoding, are helping to provide insurers with the high-precision geospatial information they need to support informed decision-making and proactive risk mitigation. To navigate the evolving landscape of P&C insurance, data-driven insights for policyholders and collaboration with governments can also lead to a more resilient future. To learn more about how high-precision geospatial data for insurance and get involved in our next roundtable, get in touch with Ecopia’s insurance team.