Commercial insurers must adapt to new kinds of properties…
Some new industries with unusual insurance concerns have steadily increased in popularity in recent years. Carriers and their partners constantly have to adjust their practices to ensure they are providing the proper amount of coverage to these new, relatively unfamiliar businesses.
The burgeoning food truck industry is a prime example of a growing industry with unique insurance concerns. While these establishments have some of the same issues of concern that restaurants do, kitchen equipment, for example, there are also the same concerns associated with automobile insurance.
Food truck owners normally have to deal with a complex combination of different policies, including commercial auto, business owner, and commercial general liability insurance, to name a few. Some carriers are going so far as to even create a distinct Food Service Vehicle insurance policy to offer these kinds of businesses, in order to provide them with the right kind of coverage.
…as do P&C insurance companies…
Personal lines insurers are not immune to these constant changes either. While, generally speaking, a home will always have walls and a roof, there are numerous structural and technological innovations gaining popularity amongst homeowners. For example, some home technology devices, such as water leak detectors and smart thermostats, can be beneficial when it comes to monitoring a risk and preventing major losses. In fact, these devices are now seen so positively, that some carriers are offering discounts to homeowners that utilize them. But the big question is, how do you know that they are?
It must become a part of the initial inspection process. A Millennium client decided to start offering certain benefits to smart home device users and we were able to create a set of referrals that would allow an inspector to confirm whether or not reported systems were, in fact, being utilized in a home.
With these new kinds of policy types and home technologies, must also come a new approach to those inspections.
Take the earlier example of food trucks. Carriers need to know the same type of information about these businesses that they do for any other commercial auto policy. At the same time, it’s vital they also receive a lot of the same information gathered during a commercial food survey. Doing two separate types of inspections for one business is not a good use of a carrier’s time or money. For example, a food truck will not have the same types of alarms or security systems as a brick and mortar restaurant, but it will have some of the same kitchen concerns. Their partners need to give carriers the facts they need to underwrite for that specific business, without superfluous or unnecessary information, including results of an inspection that is not an exact fit for that business type.
Furthermore, vendors must be aware of all other new property innovations, like the smart home devices discussed earlier, that may affect how a carrier views that policy. Inspection services must provide adequate training for inspectors to recognize these new innovations, as well as confirm that information and relay it to the carrier.
To ensure carriers receive the right, specific information they need for each kind of policy, vendors need to adapt their inspection forms to match these unique structures and businesses. It’s vital to take into account the distinctive combination of issues these unique properties have, in order to efficiently get that necessary information to the carrier.
How do carriers get accurate, complete information about the properties they insure, while still giving their customers a positive, noninvasive experience? Insurance companies are in a unique, sometimes challenging, situation in that they want to provide accurate and adequate coverage, while also attempting to create a positive and unobtrusive process for their customers. Evaluating certain aspects of a home’s interior, such as the electric, heating or plumbing configurations, is necessary in some circumstances, making entering a policyholder’s home unavoidable… that is, until now!
Consumers have been able to use their “smart” phones for completing most any purchasing, banking or data sharing activity today. Through recent innovations created by Millennium, they are now also able to use their phones to mitigate the need for an inspector to enter their home. Millennium’s new Self InspectR™ service gives homeowners the ability to submit qualified interior images, which are required by the carrier for underwriting, and in certain circumstances, to have those images linked directly to an exterior inspection which may have been performed simultaneously by a qualified surveyor. This linkage allows the carrier’s underwriters to review and make an underwriting decision utilizing all of the property survey information at one time.
Self InspectR is a particularly ideal solution for a homeowner whose ability to establish a mutually agreeable appointment time is limited, such as those with seasonal of vacation properties. Self InspectR™ gives policyholders that choice and lets them utilize an innovative, yet user-friendly, technology to complete the inspection process.
Self InspectR can be used on a “smart” cell phone or tablet device equipped with a camera. And, to mitigate concerns both regarding storage space usage on a consumer’s device, as well as data security, Self InspectR does not require a policyholder to download any kind of application or program; Rather, the device’s own web browser is employed to instruct the homeowner and capture images.
How does it work?
The process is simple. An email is sent to the homeowner making them aware that the Self InspectR option is available, and a link to select it. After electing to use this service, the homeowner will answer a short series of simple questions about their home before being asked to take the required photos. When they are prepared to take one of the required images, Self InspectR provides them with both a sample photo of the object and step by step instructions to ensure they provide an accurate and high-quality photo for the carrier. Once submitted, the images are systematically qualified to validate they are from the correct location (via automated geocoding within the application) and are then reviewed by Millennium’s property specialists to validate image content and identify property hazards and conditions.
In addition to the customer satisfaction benefits related to eliminating the intrusion and time imposition associated with homeowner appointments, Self InspectR provides carriers the underwriting information they need in a much quicker time frame. This coupled with the built-in workflow automation of Millennium’s MAPS inspection platform, creates an optimally efficient and well-documented workflow for interior inspections, while simultaneously fostering a more flexible and pleasant experience for policyholders.
As every insurance carrier pursues market opportunities, they take on new challenges for their underwriters. Suffice it to say, one size does not fit all when it comes to inspections. Very few vendor partners are well positioned to assist carriers with these challenges. However, with a veteran staff of insurance professionals, Millennium Information Services is well prepared to identify and solve those new issues with confidence.
Get Information You Need
Whether a carrier expands into a new geographic area or sees a change in their customer’s behavior, adapting their inspection process is critical. Insurance carriers do not just need to understand the changes developing within their customer base. They also need to be able to gather specific data on how these changes are affecting the risks they insure.
Urban Areas: Rehabbed Homes
A Millennium client that specifically covers urban areas, which are primarily made up of older homes, needed additional insight into these risks. These homes are often either in need of updating or have already undergone full rehabs. This client hoped to avoid major losses through high-risk homes in need of updating. Originally, this client attempted to get the information they needed through an Electrical Heating and Plumbing supplement. Although this provided significant details regarding these systems, the carrier needed specific information which would indicate prior rehabilitation efforts. To meet this need, Millennium created an entirely new supplement, designed to fit their specifications and inform underwriters if a home has been extensively remodeled recently. The ability to designate rehabbed homes from those in need of updating allowed this client to offer discounts or other incentives to homeowners with lower risk dwellings.
High-Value Homes: Technology Early Adopters
Some new client opportunities are not geographic but are instead based on consumer demographics that a carrier may choose to target. With advances in home protection devices, many carriers are now considering, if not already providing discounts and incentives to homeowners who are embracing the latest home technologies, especially devices like temperature and flood monitors.
One of Millennium’s carriers who provide sophisticated coverages to mid and high-value homes needed to verify their customer’s utilization of protective smart home devices. Millennium was able to incorporate the identification of this type of technology into our inspection process specifically for that client with new smart home referrals. These referrals alert this carrier when a homeowner has implemented some of these devices so they can apply policy incentives for select policyholders.
Specific Underwriting Guidelines: Highly Scrutinized Inspections
While some carriers may not have demographic or geographic needs that warrant a specific solution, many still have very specific underwriting guidelines to which their inspection vendors need to adhere. For example, while Millennium’s commercial inspection forms cover all the critical data points needed to properly rate these risks, carriers need inspectors and quality review staff to observe a set of guidelines specific to their requirements. For this particular need, Millennium field management maintains specialized inspector training for each carrier program and provides details regarding the specific requirements of each client to ensure that the carrier specific instructions are understood and applied uniformly in the field and by our quality review team.
Each time an insurance company pursues new market opportunities, their underwriters will face new challenges. To be effective business partners, their vendors need to be prepared to help develop solutions and strategies to meet those challenges with confidence. Millennium Information Services has a staff with decades of underwriting experience and is able to provide carriers with solutions to every unique challenge they face.
In the past three weeks, two hurricanes have devastated the Caribbean, Texas and Florida, along with other parts of the United States. Last week Hurricane Irma killed at least 26 people in Cuba before even reaching the Florida coast. Irma, which was downgraded to a tropical storm Monday morning, triggered evacuation orders for more than 5 million people in the Florida Keys and Marco Island before it hit the state over the weekend. Authorities say that the full extent of the devastation is still unknown as many islands that have been hit hardest cannot yet be accessed.
To date, this is the first year that the continental United States was hit with two Category 4 hurricanes in the same year. The National Weather Service released a statement Monday that numerous states still need to brace for Irma, including Georgia, Alabama and Tennessee.
Still bearing down on the southeast portion of the country, meteorologists are calling the impact of Hurricane Harvey catastrophic. Here are a few important things to know about the storm to keep in mind.
- As of Monday morning, between 15 and 25 more inches of rainfall is expected across the Texas coast, with isolated storm totals as high as 50 inches.
- There is also a threat of tornadoes in the coastal areas of Texas, along with the rainfall.
- Over the weekend, every major roadway in the Houston area was flooded with more than 15 feet of water in some places.
- Meteorologists have reported that the storm may even reintensify during the beginning of this week.
- The flood threat has now spread farther East into Louisiana, with as much as 15-25 inches of rainfall expected in the southwest part of the state.
- During these types of storms, contamination of clean water is a large concern. So an adequate supply of drinking water is crucial for residents in affected areas
- FEMA officials say that they are prepared to be in Houston “for years” dealing with the aftermath of Hurricane Harvey.
- As of Monday morning, more than 300,000 people in Texas were reported without power.
- The storm will most likely have a large impact on numerous agriculture sectors in affected areas, including cotton, corn, and soybeans.
To help those affected by Hurricane Harvey, Millennium has contributed to the recovery efforts in Texas through Feeding Texas and Samaritan’s Purse. You can follow the links to find out how you can help.
How can images gathered via satellite be effectively used by underwriters?
Advances in satellite imagery have increased over the past 15 years, particularly within the last several years as the technology has drastically improved the clarity and quality of images. While those improvements have made the usage of aerial imagery more acceptable in the property and casualty insurance industry, in many circumstances, such as newer or recently updated homes, or those located in less populated areas, it remains insufficient to properly underwrite a risk. The details of home construction and accuracy of conditions and hazards on a property really require boots on the ground in the form of an experienced property inspector.
Satellite images typically lack the close-proximity photos on conditions which underwriters require in order to take action, nor can they identify issues like aggressive dog breeds, trip and fall hazards, the true occupancy of a property, and issues with surrounding trees, among others.
A major concern to all carriers needs to the the timeliness of images that they are utilizing. Different aerial image distributors provide significantly different frequency of updates to their images. The two photos below are examples of the same house available through two different providers. There are a number of apparent differences that would impact an underwriter’s perspective and their determination of this h0me.
The first photo shows a much larger rear porch and a smaller living area, while the second photo has a clear addition to both the front and rear of the home, increasing the TLA, as well as an expansion of the gable roof and a decrease in the rear flat roof. Additionally the lack of clarity in the second photo makes it very difficult to see any issues with trees overhanging.
Finally the quality of both pictures make it impossible to determine the estimated life and adverse condition of the roof, the leading source of claims for insurers; that information is absolutely critical, and is only available at this point through a physical inspection.
Aerial imagery can be useful in situations where accessing the property is limited, such as accessing areas behind privacy fences, or for validating the relative wall dimensions gathered during an inspection.
Recognizing the benefits and limitations of aerial imagery is critically important for carriers to developing a successful underwriting strategy which utilizes them.
How can you make policyholders more comfortable with home inspections?
Physical inspections provide indispensable information to insurance providers. From potential hazard and condition issues, to structural changes to a home, one can simply not determine the accurate coverage amount for a property without a professional taking a look at it. Inspectors are able to determine the estimated remaining life of a roof, the occupancy status of a home and other conditions that, while invisible to the untrained eye, are crucial pieces of information to insurers. Without that up-to-date data, underwriters cannot make a fully informed decision when writing and updating policies.
While vital to making profitable decisions, these inspections can be difficult to complete, due, in large part, to low homeowner engagement. Without a complete understanding of the inspection process, policyholders can be confused or uncomfortable by the inspector’s presence. This can lead to a reluctance to make necessary appointments, or worse, a dangerous situation for the inspector. The completion of a detailed and current inspection is dependent on the cooperation of a homeowner. It is also important as a vendor to create as positive of an experience for the policyholder as possible, resulting in an equally positive experience for their agent.
One way to improve the homeowner’s inspection experience is to educate them about what the inspection consists of and why it is being done. This is particularly important when a survey requires that the inspector photograph and take notes inside the home. In order to easily set up an appointment with a homeowner, they need to have confidence that the company and the person that they’re allowing into their home is professional, well in advance of the actual inspection. To accomplish this, Millennium Information Services worked with the management of Florida Peninsula to create a pre-inspection in-house call process, improving that experience for their homeowners.
This process proved to not only make the inspection process more efficient, but it also made homeowners more comfortable with the inspectors. Incomplete inspections due to homeowner unavailability decreased by 51.7%. The advanced notice and better understanding of the inspection process also reduced policyholder complaints about inspectors by 51.4% All of these results show that increased homeowner engagement not only improves the completion rate of inspections, but it also makes for a much better inspection experience for homeowners.
First homeowners, then agents.
It’s important to also create a positive experience for the agents involved. In the case of Florida Peninsula, agents were new to this advanced call process as well. To help ease the concerns of agents involved in the process, Millennium management traveled to Florida and met with them as a group to provide details as to how the pre-notification process works, and obtain feedback on the program’s success. This meeting allowed agents to gain an understanding of the process, ask questions and to have all of their concerns addressed.
In another situation, Millennium has been able to increase agent engagement in a policy renewal inspection process through the delivery of daily notification emails. After receiving inspection orders from the carrier, Millennium sends all agents associated with those policies an email that lists each policyholder whose home will be subject to an inspection during that period. This advanced notice prepares agents for any questions they might get from their customers and helps to facilitate a smooth line of communication between all three parties.
Effective, early communication with homeowners can be completed in many different ways. Another Millennium client had an issue with policyholders being confused by the inspection process, leading to a high number of inspection refusals. To help those homeowners become more comfortable, Millennium created an informational sheet that agents could give to policyholders explaining why inspections are done and how that process works. This pre-inspection education and coordination between Millennium, the agents and the homeowners led to a decrease in incomplete inspections for that client and significantly improved the policyholder’s perception of the process.
Millennium Information Services, Inc. is always looking for ways to enhance the inspection experience for both insurance providers and their customers, particularly through increased homeowner engagement. The more educated both the policyholders and their agents are with what we do, the more comfortable they will be with the entire inspection process. That higher level of comfort allows Millennium to provide our clients with the most efficient service possible, while delivering the type of comprehensive home evaluation needed to create a profitable book of business.
Construction costs and home prices have clearly increased in the past few years. According to the Federal Housing Finance Agency home prices rose 6.2% from Q4 2015 to Q4 2016. While that increase is in part due to a rise in building costs, evidence shows that there is also a shortage of skilled labor, particularly in the commercial construction sector.
Many of the replacement cost companies sell indexes, or “inflation guards,” that insurance companies apply universally across their entire book of renewal business, usually by 3-digit zip code. While this seems like a logical approach to the rising costs of construction, there is simply not that kind of uniformity when it comes to property insurance.
Several years ago, when oil prices were at an all-time high, petroleum based products rose much faster than most other building material. Therefore, roof replacement costs were very different depending on the materials used. Labor in the oil patch state of North Dakota was scare and very expensive during the latest oil boom. Did the 3-digit zip adequately cover the differences in labor cost? The short answer is no. Building costs may ebb and flow, but they mostly go up. After a few quarters of applying inflation indexes, your renewal book of business could be significantly underinsured.
One way to approach this issue is with individualized inspections. The data gathered by actually going to a residential or commercial property is invaluable when updating that property’s replacement cost. These inspections not only help create the most accurate insurance-to-value (ITV), but it will also give insurers a clear and current list of conditions and hazards for each and every property. (How else can an insurer truly know whether or not a policy is worthy of keeping on the books?) Although this will provide the most comprehensive evaluation, there are practical considerations of performing a book-wide evaluation, not the least of which are the cost of the inspections and the internal resources necessary to process actionable findings.
At Millennium, we understand this dilemma and that is why we’ve developed our PreInspectR® optimization tool. Our clients can utilize this tool to score an entire book of business and to focus their efforts, and expenses on those properties which are most likely have the worst conditions and hazards. Additionally, the PreInspectR® model also provides a score that identifies those properties that are most likely to have ITV issues. Depending on the level of interest in focusing on proper valuations or the existence of hazards, either or both PreInspectR® scores can be used to determine which properties should be inspected. Actionable rates for those properties inspected that were identified by a higher PreInspectR® scores can be as high as 80%.
Our “one size does NOT fit all” approach has been well received by our clients and helps them identify properties that are either no longer an acceptable risk or that are in need of repair. It also tells them what properties are underinsured by applying the proper coverage amount, helping fund the renewal book examination and ensuring adequate coverage.
Where are the Drones?
There continues to be a lot of discussion in the property and casualty industry about the use of drones as part of the property inspection process. The FAA has even relaxed the use of drones for commercial usage, so where are they and how are they being utilized?
On June 21, 2016 the FAA announced Part 107 that provided new restrictions and requirements for the commercial usage of unmanned aircraft. These rules, which went into effect on August 29, are broken down into three categories: Operational Limitations, Remote Pilot in Command Certification and Aircraft Requirements.
The Operational Limitations require that the aircraft weight must be less than 55 pounds, the operator must maintain a visual line of sight with the craft and may not operate the craft over any persons not directly participating in the operation unless they are covered by a shelter. Operation is limited to daylight hours only, with maximum altitude of 400 ft. above ground level, and weather visibility of no less than 3 miles. As with any aircraft, the operator is required to perform a pre-flight inspection, and operations within FAA controlled airspace (near airports) are only allowed with the required permission of local Air Traffic Control.
The Remote Pilot in Command requirements are that the operator of these crafts must first successfully complete an on-line test and vetting by the TSA in order to obtain the mandatory piloting certificate. Upon receiving their certificate, operators are required to file reports with the FAA in the event they are involved in any serious injuries or create damage over $500 while operating their aircraft.
Unlike manned aircraft, unmanned aircrafts do not require an airworthiness certificate.
So, do these new regulations create an environment where drones can become a ubiquitous tool of the personal lines insurance surveyor? Well, no, not quite yet. At this time, most commercial uses of drones for property insurance purposes is for survey damage within catastrophe areas, or for large commercial structures. Why the limited use? Well, there are several reasons. Even with the relaxed rules, drone usage for home and most commercial property inspections is still not a practical or an economical approach to inspections. The pilot certification requirements, combined with the cost for equipment and maintenance of the aircraft make the cost of utilizing drones on home inspections excessive; the average drone inspection cost is about $150 per hour. Another big issue is privacy. Currently there are no Federal laws concerning privacy with the use of drones, other than the FAA restriction on using them over uncovered non-participants. Discrete regulation of drone usage within public areas has been left up to states and municipalities, and many states are imposing increasingly restrictive privacy laws with serious consequences. There is also the potential for property damage. A gust of wind or pilot error could cause an aircraft to come into contact with a structure, creating a liability issues for the pilot. All of these issues will continue to hinder the effective use of drones in the surveying of homes for insurance underwriting purposes. Drones will, however, likely play an expanding role in surveying commercial structures, so long as the operation can be performed safely, within the line of sight of the operator, and can ensure against flying over anyone not participating in the operation.
At Millennium, we own several drones with which we conduct periodic experiments in order to assess their potential for enhancing property surveys. Thus far, due to the limitations of the new FAA rules and those of evolving municipal regulations, and the anticipated discomfort of homeowners, we believe a true commercial application for home inspections is still a ways off in the future. For these same reasons, a broad application for commercial inspections is also limited at this time. Nonetheless, we will continue to monitor the regulatory environment surrounding drone usage, and seek out the right solution for utilizing drones in conducting surveys in ways which are both economical and beneficial to our clients.
For many years, the Insurance industry has been mining data to better understand how their new business should perform and to get an actionable view into their existing Book of Business. At Millennium Information Services, we also believe in the power of data by giving our clients insight into their inspection data through our comprehensive, detail-rich property survey reports, state-of-the-art data mining and analytical tools, and valuable inspection metrics that categorize and assess property risks that can all be used to make intelligent, insightful underwriting decisions.
It begins with intelligent data. All data tells a story and specifically, property data, can give a carrier a view into the quality of new business submissions, and also provide the underwriter better insight into the condition and hazards of a property to make intelligent decisions that best follow the underwriting guidelines of their company. Millennium captures hundreds of property and risk characteristics, including home construction features, policy rating variables, and conditions, hazards, and liability exposures. This detailed property data is fed into Millennium’s Automated Property System (“MAPS”), which serves not only as a data warehouse and workflow management tool, but offers a robust, flexible set of reporting capabilities which allow carriers to easily mine and analyze their inspection data. Identified issues are referred and assigned a weighted score (“Referral Value”) based on severity and the level of the underwriting concern. The sum of these weighted scores represents the Total Referral Value for each inspection – a discreet, policy-level indication of the cumulative severity of all noted conditions. Each inspection is also assigned a unique indicator, or Stack Logic® code, based on the prioritized outcome of the inspection (e.g., types of conditions observed, occupancy status, insurance-to-value opportunity, etc.). These qualifiers transform raw inspection information into Intelligent Data from which precise underwriting decisions can be made objectively.
Evaluating agency performance is one opportunity that is provided through utilizing Intelligent Data. The chart below shows how, with the use of MAPS Ad Hoc reporting capabilities, a quick analysis of Stack Logic and Referral Values by Agent can be used to easily identify agents with a quality of business and/or excessive ITV deficiencies on policies submitted. Using pre-qualified, Intelligent Data allows policy quality analysis to be constructed quickly and for trends to be easily identified and monitored, long before profitability is impacted.
Identifying, understanding and being able to quickly respond to regional trends in conditions and hazards is also promoted through the evaluation of Intelligent Data. Roof damage is one of the most significant source of claim activity across the property and casualty insurance industry. That’s why, in addition to Stack Logic and Referral Values, we’ve developed our Roof Life Indicator. On each inspection report, along with comprehensive, detailed photo documentation, we provide assessment of the remaining roof life, broken into 4 categories, based on the observed condition of the roof at the time of inspection: 0 to 5 years, 6 to 10 years, 11-15 years, and 16+ years. Like Stack Logic and Referral Values, the Roof Life Indicator can be used not only to develop consistent action guidelines for individual risks – from roof repair/replacement to ACV roof endorsement to future re-inspection – but also to analyze the inspection book and easily identify those segments where roof age and condition issues are more prevalent. For example, take a look at the chart below showing the distribution of Roof Life Indicator by state:
With MAPS’ dynamic reporting capabilities, carriers can easily drill down below the state level and view roof life indicator results at a county, city or zip code level to identify specific geographic areas where increased underwriting focus and action may be needed to mitigate future roof losses.
These are just a few examples of how Millennium is helping carriers to manage and improve the quality and profitability of their business through the use of data and data analytics. Intelligent Data, smarter decisions – that’s the Millennium advantage.