In the News: Cracking the geocode is fundamental to risk pricing2 Minute Read
Insurers typically consider postal addresses during quotation and assess levels of risk associated with the postcode before pricing the risk and generating a quote. This has been the process for decades; whole pricing models have been built on the collated address data generated from this exercise. Yet, in an exclusive article for Insurance Day, Mark Varley explains that this approach must change, and why geocoding is fundamental to getting risk pricing right.
“The problem is that postcodes are broad areas that could encompass a variety of different terrains. A property at one end of a street could sit right on the edge of a flood plain, whereas one at the other end may be on a slight elevation, rendering it high and dry. Same postcode, but a much more attractive risk to any insurer.”
So, if we can’t rely on a postcode, where can we find accurate address information to help businesses to understand their risks?
The answer lies in geocoding. Geocoding is the process of taking an address and determining the geographic coordinates associated with it. A good geocoding service must have strong local knowledge and the ability to understand the nuances of addressing in that area, for example; knowing that ‘1 High Street’ and ‘Cosy Cottage, High Street’ are the same address. It must have exceptional technology, using advanced search capabilities to obtain higher quality matches, and it must be able to leverage high quality data from authoritative sources, for example, the Ordnance Survey (OS), in the UK.
“Cracking the geocode is key. Insurers who can work with local experts to embed geocoding into their risk assessment and rating processes will have a better and more accurate view of risk, giving them greater resilience, the ability to be more competitive and importantly more financially robust.”
Read Mark’s full article in Insurance Day here (subscription required).
To find out more about how geo-coding gives insurers greater certainty, click here.
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