AAISdirect started out as an online library of AAIS forms, manuals, and bulletins, and it continues to serve that function.
Users now have a newly designed home page with search capabilities across all documents, lines, and states, plus improved paging and results displays, and new feedback forms for contacting AAIS.
More importantly, AAISdirect users now have direct access to data sets of rating information in Microsoft Excel or XML format they can import into company systems without the time, cost, and errors associated with manual input.
The biggest enhancements to AAISdirect, however, have been the addition of complementary risk information services provided by third party vendors.
“AAIS is committed to making AAISdirect an indispensable resource of AAIS materials plus complementary services for evaluating and pricing risks,” says Paul Baiocchi, president of AAIS.
Today, every AAIS affiliate that uses AAISdirect, regardless of their line(s) of affiliation, has access to the “Risk Meter” risk mapping service.
Risk Meter, a service of CDS Business Mapping, Boston, Mass., provides online access to more than 30 categories of geographic information related to hazards at a location. The information provided specifies a location’s distance from coastlines, fault lines, and flood zones, as well as its exposure to hail, tornadoes, wildfires, crime, and other hazards.
Of particular importance to companies that use AAIS programs is Risk Meter’s information on the distance from an insured location to the nearest fire station. That distance is a determining factor in the application of AAIS’s simplified fire protection definitions (“protected,” “partially protected,” and “unprotected”). Having the distance available automatically through Risk Meter saves time and improves accuracy.
In addition, insurers that use AAISdirect for specified lines of insurance have access to online property valuation applications developed by e2Value, Inc., Stamford, Conn., a leading developer of online valuation applications.
AAIS Homeowners, Mobile-Homeowners, and Dwelling Properties affiliates can have access through AAISdirect to e2Value’s “Residential” online property valuation service, which provides systematic valuation procedures for a wide range of residential property, including high value homes, modular and kit homes, condos and co-ops, alterations and additions, and more.
Since November 2005, AAIS Farmowners and Farm Properties affiliates have had access to e2Value’s “Farm & Ranch Estimator” application, one of the first programs to implement automated valuation for farm property.
In the latest enhancement to AAISdirect, companies affiliated with AAIS for its Agricultural Output, Businessowners, Commercial Output, and Commercial Properties programs can have access to e2Value’s “Commercial” property valuation
program.
Among other things, the Commercial valuation service provides data for all major construction specification items (HVAC; wall, roof finishes; plumbing and fire protection) plus the ability to value multiple structures, with photos, within one valuation.
These online services, provided without additional charge to AAISdirect users, allow carriers to identify hazards and estimate insured values quickly and systematically, helping them improve their insurance to value ratios and collect the appropriate premium for their exposures.
“It is clear to us that AAIS is highly focused on satisfying the needs of their affiliates and presenting them with cutting edge service and technology-based opportunities,” says Todd Rissel, CEO of e2Value, Inc. “We’re pleased to expand our relationship with AAIS for the benefit of the insurance industry.”
“We are excited to be working with AAIS and its member companies,” says James Munson, director of consulting services for CDS. “The value provided with this service will help companies maintain underwriting discipline without substantial changes to their own underwriting processes.”
In the accompanying segments, Rissel and Munson respond to questions posed by Viewpoint regarding future developments related to their
services.
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Responses by Jamie Munson,
director of consulting services
What are the biggest challenges today in risk mapping in
personal lines, and how is Risk Meter addressing them?
Maintaining underwriting discipline is the biggest challenge.
2006 was an extremely profitable year for many carriers, but with this success, downward pricing pressure is inevitable. It’s easy to talk about underwriting discipline and enforcing rules, but until you give the end user a suite of tools that truly makes the job easier, rules will not be enforced.
Information is what drives decisions, and information comes at a cost. In the past, the resources devoted to gathering underwriting information involved a great deal of manpower, which is extremely expensive, laborious and riddled with inaccuracies. Risk mapping brings crucial data to the desktop in “real time” with a high level of accuracy at a fraction of the cost.
For example, it should be pretty easy to determine a rating territory, right? But, I would guess that most companies have an error rate in excess of 10%. This can have a huge impact on premium--positive and negative--and create a lot of compliance headaches with state insurance departments
. . . What about commercial lines . . . ?
Volume is typically lower and premiums much larger in commercial lines. Therefore, any investment in gathering information is money very well spent. It is stunning how little this information costs in comparison to even a small claim.
For example, suppose that a structure is not in a flood zone, but is a couple of hundred feet away from one. Suppose also that the structure is elevated one foot above the base flood elevation. If a flood goes three feet above its normal height, a carrier could be facing hundreds of thousands in a single claim.
. . . and farm lines?
We are beginning to see increased awareness of risk mapping for farms. With the tools available today, carriers can get a bird’s eye view of property and its outbuildings, fields, crops, and more.
Risk mapping allows a carrier to segment business in a way that was not possible before. This allows for better pricing and [determining] how perils may affect a given area. There are now tools available to locate farms and other rural property by range, section, and township.
Finally, in all three areas--personal, commercial, and farm lines--users of risk mapping can earn a considerable return when it comes to negotiating for reinsurance. The more information you provide, the quicker it gets done and the better your rate.
How is the widespread use of risk mapping applications
affecting insurance underwriting operations?
Risk mapping is improving both the efficiency and accuracy of underwriting operations.
Companies make great efforts to develop rules for pricing and underwriting. Once those rules are in place, they need access to timely, accurate information. Risk mapping is a natural fit. Once a location is identified, there are dozens of pieces of information that can be used to price the risk correctly, apply deductibles, bind the coverage, or deny the coverage.
Furthermore, as companies embrace real-time web-based services, benchmarks can be established, reviewed, and revised quickly as needs arise. Companies that do not embrace these technologies will fall further and further behind the competition.
What changes do you anticipate in the future regarding
he capabilities and use of risk mapping applications?
- Improved accuracy. In the future, parcel level geocoding will be the norm. With higher resolution aerial imagery, you will literally be able to see each insured location clearly
- Integrated web services. More and more companies are realizing the value and ease of receiving information in near real time through server to server communication. This, again, leads to huge improvement in efficiency.
- Straight-through processing. You can have the greatest rules-based engine in the world, but without information to feed into it, the benefits will not be realized. The more business you can bind without a person touching it, the larger your gross and net premiums will be.
- More data. As more data is developed and introduced, insurers
will be able to further segment business and classify risk with more objectivity. Remote sensing, real time weather feeds, and real time aggregation are possibilities for the future.
Responses by Todd Rissel,
chairman and CEO
What are the biggest challenges today in residential
property valuation, and how is e2Value addressing them?
Keeping up with market changes is the greatest challenge for most valuation providers.
The housing market used to be a fairly stable market that had a few downturns as tax laws changed and interest rates adjusted. Over the past 20 years, however, market forces have changed how housing is perceived as an investment:
- The Federal Reserve stabilized inflation.
- A greater portion of the public started participating in the stock market.
- There was a dramatic rise in the stock market in the 1990s, followed by a dramatic crash in the early 2000s. At the same time, more commodities traded are affected by world prices and speculation.
- The investing public looked for safer markets, and real estate seemed like a stable market, based on historical results.
- “Baby Boomers” have more cash to spend than previous generations and had a desire to have more than one home.
With the demographic changes, real estate became more like a stock market and had more dramatic swings up and down--as investors learned in the 1990s and through the early 2000s. Dramatic changes in housing prices are more likely today
than in the past.
Also, in the past, the cost of building materials were driven primarily by local conditions, but now people realize that what happens in China matters in their neighborhood. It is truly a world
economy and we compete for materials we used to have a lock on.
In the past, data providers focused on the price of a brick or drywall or lumber. Today, the dynamics of world markets matter much more in property valuation. At e2Value, we focus on markets, demographics, population trends, immigration, the age of the population, and more, in addition to the cost of materials and labor.
It is easy to determine the price of a brick. It is not as easy to determine how market conditions will impact the building the brick will be used in, or the composition of the workforce making, delivering and installing the brick.
. . . .What about commercial and farm property valuation?
There is no way to separate the commercial, farm and residential building markets from local or worldwide influences. The housing market and its appetite for materials impacts the other markets, and vice versa. Understanding the influence each has on the building property market makes it easier and more accurate to work within each individual market--residential, commercial and farm.
How is the widespread use of automated valuation
applications affecting insurance underwriting operations?
Automated valuation applications are making the task of selling accurate replacement costs more challenging.
From my first days in the P&C business 20 years ago until now, the true “value” of a home has been at issue.
Insureds generally know their home’s market value, mortgage companies generally care about a property’s market value, and municipalities and taxpayers know their tax valuations. Today, there are now a plethora of websites and services offering consumers an updated estimate of their home’s market value.
All that has muddied the waters regarding a structure’s replacement cost value. What companies, agents, and e2Value care about--and policyholders should care about--is the amount it will take to replace a structure at the time of a total loss.
Today, with home prices leveling off and events like Hurricane Katrina raising awareness of catastrophic loss, the public may be more attuned to the different types of property values and how they affect their investments and retirement.
Therefore, I think automated valuation models provide an opportunity for insurance companies and producers to explain the importance of proper coverage for replacement cost.
What changes do you anticipate in the future regarding the capabilities and use of valuation applications?
I expect the availability and abundance of information will make it easier to explain to agents, underwriters, and consumers why a structure costs what it costs to replace.
At the same time, the changes in information, technology, and world markets will continue to challenge valuation providers to determine what data applies and does not apply to a given situation.
Homes will change faster, buildings will change faster, the replication and substitution of materials and techniques will change faster--all making our jobs more critical and more challenging.
This makes it a very exciting time to be in the P&C industry and an application provider like e2Value.
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Risk Meter
Risk Meter, a service of CDS 
e2Value, Inc., Stamford, Conn.
