Jonathan Guard
Jonathan Guard,
Director, Commercial Insurance, UK & Ireland, LexisNexis Risk Solutions

September 6, 2018

Over half of commercial insurers in the UK (51%) collect data from some form of smart building technology, including data sourced from sensors in shopping centres, warehouses, certified types of occupancy or motion detectors, flood or fire sensors. But only 11% of those collecting the data believe they are getting full benefit from it.

The majority of commercial property insurers (70%) believe increased emphasis will be placed on data protection in the future, and that this will drive increased interest in new data sources and data enrichment for powering specific processes, and contributory databases (either pooled claims data, policy data or property data).

Over half of commercial insurance providers collect data from building sensors

These are some of the findings from our recent LexisNexis Risk Solutions survey* looking at attitudes to data enrichment, application form prefill, and future data sources for commercial property insurers.

We know that automation is going to play a more significant role in insurance in general, for example, if we consider AI and machine learning applied to processes and decision trees for faster and more efficient processing. From initial marketing, through the insurance policy lifecycle to point of claim, automation helps cut costs, speed decisions, and improve customer service.

While there will always be a place for the human element in commercial underwriting, there are a number of things insurance providers can do to introduce automation into areas of the insurance policy lifecycle where manual processing is either unnecessary or costly. The insurance lifecycle consists of seven points of contact that typically occur between an insurer and a customer: marketing, contact, quote, underwriting, renewal, compliance, and claim.

Automation can improve processes within each of these contact points. It can help identify the risk profiles of prospects suited to your business (marketing). It can utilise form prefill solutions for the future to create an ease of doing business (contact), and even help report information to lending institutions or regulatory bodies (compliance).

Considering that in motor telematics, sensor data – with or without additional technologies such as streaming video, photo recognition, automated voice processing, drones for aerial imagery and incident reconstruction – is already coming into use for automated claims processing, triage, and for incentivizing safer behaviour, it’s a view of the future that will be relevant for commercial buildings too.

Creating new value from new risk data sources

Speeding up applications and claims in the event of a major disaster such as a flood event or fire brings major benefits. We commented in another blog article about the use of data for faster incident response and better management of an insurer’s claims resources over specific geographic areas, to minimize losses and provide support to customers.

But this future of smart buildings data, live alerts, and automation is going to rely on a data platform that is able to close the information loop for insurance, providing an opportunity for the insurer to act on the data in the form of preventative action (alerts), or for better risk rating (attributes and market scores). Only in this way can new business value be created from the available data, and the modern all-inclusive vision for insurance in the Internet of Things (IoT) be made a reality.

A building with movement sensors for flows of people, flows of water, tighter security due to smart entry systems, real-time surveillance and faster emergency response for example, is going to generate new, as-yet mostly unused rating factors into the insurance world.

It’s up to the strategy of an individual insurer to determine how much they focus on covering the traditional risk, and how much on the new services.

Insurers can potentially combine, analyze, and present insights or alerts from the large sets of data in a manner that tenants or other stakeholders will find useful, augmenting their actions and behaviour in the whole area of risk. On the buildings side the change is going to require some disparate building management systems to come together with more standardized and integrated IP networks that currently span many different interest groups, landlords and tenants, as well as insurance providers.

Emerging eco-system and de-duplication for smart building technology data

But in this emerging eco-system there is a prevailing view among insurers that smart building data has potential to be a part of future data enrichment for competitive advantage. In particular a portion of commercial insurers (72%) in our survey* feel strongly that smart buildings technology will be ‘extremely valuable’ or ‘very valuable’, and that it will have a positive impact on risk mitigation in future.

Out of those insurers not currently using smart building data, 63% said they are ‘extremely likely’ or ‘very likely’ to use it if available. Another 37% said they are ‘somewhat likely’, making a total 100% with a positive intent.

  • Commercial property insurers have mixed views of smart building technology contributing specifically to a custom risk score, but the majority already consider the data valuable and express a positive inclination to use it.
  • Although many insurers claim they currently collect smart building data, very few are actually putting it to use. As such, a contributory data enrichment project in the industry, culminating in a score, could enhance the use of data in this area.  However, insurers’ existing infrastructure could be a barrier to use. Half of the respondents perceive that their systems are not currently capable of completely supporting the use of smart building data.

In conclusion, commercial property insurers believe smart building data is valuable and they are looking for a common platform to be able to make it a business reality. A majority (68%) are inclined to use a custom score based on this data, and a contributory data platform in this regard has the benefits of standardisation and de-duplication of efforts across the industry.

Interest in using smart building data in the future exists, even among those insurers who are not currently ingesting it. This is a vision that at LexisNexis Risk Solutions we’ve begun discussing with our insurance partners. It’s a positive vision for the industry and for society that will ultimately incentivize buildings that are safer from fire, flood, theft and other perils.

For more insights from these research results download the LexisNexis Risk Solutions commercial property insurance white paper ‘Enabling Enrichment‘.

*LexisNexis Risk Solutions carried out an anonymous survey, the UK Commercial Property Insurers Study, 14 November – 13 December 2017. Data collection: A mixed mode of web and telephone survey was used to collect data. To qualify, respondents were screened to meet the following criteria: Currently employed in the insurance industry (direct insurers, indirect insurers, brokers, and MGAs) with responsibilities related to underwriting or pricing. The sample was 77 commercial property insurers who spend most of their time working in the commercial insurance sector.

Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.