Location, Inc. Index Helps Insurers Assess Structure Fire Risk
Staff Writer | February 01, 2016
Location, Inc., a provider of location-based data and tools used by corporations for risk analysis, has introduced a new risk index to help insurers address the challenge of assessing structure fire losses due to human negligence.
Every year structure fires cause billions of dollars in insurance losses. In 2014 alone, U.S. fire departments responded to 494,000 structure fires, resulting in approximately $9.8 billion in property damage.
Insurers often associate structure fires with catastrophic events, such as wildfires or infrastructure failures (e.g. heating system faults). In order to gain a better understanding into these low frequency events insurers often factor in credit scores or public fire protection capabilities.
While the data sources may provide additional insights into structure fires, they do not fully address behavior-related incidents, such as arson or accidents involving cooking, improper appliance use, smoking, chimney, electrical, and other negligence and property-maintenance related incidents.
With Fire Risk Index by Location, Inc., it’s possible for underwriters and agents to factor in human negligence when assessing structure fire risk. Based on millions of policy years of fire-loss data and over 20 proprietary geospatial models, Fire Risk Index generates an easy to read risk score from lowest to highest risk for any address in the United States.
“We’ve tested our Fire Risk on over four million records with $700M in losses with both personal and commercial lines insurers,” says Dr. Andrew Schiller, CEO at Location, Inc. “The predictive accuracy of Fire Risk exceeded 94 percent when compared to the carriers’ actual fire claims.”
Personal and commercial lines insurers can use Fire Risk to reduce underwriting leakage and improve by-peril rating by factoring in human negligence when assessing structure fires. In addition, since Fire Risk provides risk scores, insurers can have Location, Inc. batch process their book of business and append risk scores to their policies. This will allow insurers to sort by score and quickly see which policies are high risk, according to Schiller.
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