Imagine an insured taking a photo of a property that gives underwriters every bit of information they need to assess the risk.
CoreLogic is working to make that happen sooner rather than later.
CoreLogic, a provider of property information and analytics primarily to the mortgage and the real estate industries, has expanded well beyond property data, leveraging its initial expertise and adding new services through key acquisitions.
By putting together all of the disciplines necessary to learn the status of virtually every property in the U.S., CoreLogic has become an enterprise provider to the insurance industry, providing “everything from underwriting solutions through portfolio risk management, cat modeling solutions, underpinned by that expertise and that knowledge of property data,” according to Jay Kingsley, senior vice president of CoreLogic’s Spatial Solutions division.
One of CoreLogic’s goals is to use all of its data coupled with increased instrumentation to foster advanced understanding of risks at a very basic, granular level, not just for insurance underwriters but also for insurance customers.
Building the Model
CoreLogic has been working with “big data” for a long time, with terabytes and terabytes of property data and other information. The property data come from about 4,000 different sources, not just one. Its databases contain more than 3.3 billion transactions, compiled over 30 years.
“We basically have everything from year built, square footage, number of bedrooms, number of bathrooms, ownership, who’s the lienholder, if the mortgage is current or delinquent for essentially every property, 98 percent of the properties in the U.S.,” Kingsley said.
About one year ago, CoreLogic acquired predictive modeler EQECAT. That acquisition came following a parade of acquisitions that included replacement cost specialist Marshall & Swift/Boeckh, the geospatial underwriting platform RiskMeter and a weather forensic company called Weather Fusion.
Geoinformatics and Geocoders
Howard Botts is a pioneer in spatial analytics and in building hazard datasets for the insurance industry. As chief scientist at Spatial Solutions, Botts oversees a group that combines property and hazard datasets along with risks analytics to provide a comprehensive picture of risk.
“What we use is geoinformatics, or geographic information systems, to look at risk at a very granular level, 10-meter grid cells typically. We can tell you the earthquake risk, wildfire risk, river flooding, storm surge, a height, or impact, flash flood. We can tell you what the sewer backup likelihood is for a particular home, lava flows, literally every risk you could think of. If you think about it, it’s multiple layers of risk on a map. We then have a geocoder, which takes an address and translates it to a place on the earth. CoreLogic has collected all the property boundaries, virtually all of them, for the United States,” he said.
Today, for example, CoreLogic is capable of mining weather radar from around the world to predict exactly where hail fell and measure its size, as well as identify where exactly wind events and intense rainfall have occurred.
“You pull that in. You have to normalize that. Data’s coming in daily. We’re extremely good at handling large amounts of data. We also have, in-house, a lot of large banks’ mortgage portfolios, so we are the largest provider of flood risk in the United States. We can work with these mortgage providers and say, when the flood zones change, now this person does need flood insurance, doesn’t need it,” said Botts.
Botts envisions the day when an insured will take a geo-tagged picture with an iPhone and that photo will provide all the information needed to “understand all of the underwriting and actuarial risk, understand what the reinsurance component of that rate is, and really have a very, very simple end-to-end solution for the consumer. I think that’s the way we are going.”
Acquiring Marshall & Swift/Boeckh has enabled CoreLogic to calculate replacement costs, reconstruction costs and even reconstruction costs taking into account the demand surge that typically raises prices for raw materials after a disaster.
Beyond that, the predictive science available from EQECAT helps explain what the risks are to that property.
“You think about a company like EQECAT. They’re looking at vulnerability as part of catalog modeling. Now we have all the structural characteristics for virtually every property. We know construction type, number of stories, basic material, all of that. We have that piece of it plus the replacement cost. It adds a tremendous amount of extra rigor,” Botts said.
Acquiring EQECAT, which is continuing as a separate entity, has given CoreLogic access to the “full spectrum of the insurance industry,” Kingsley said, as its clients are insurers, reinsurers and insurance brokers. He said more than a majority of the top 20 carriers in the U.S. use CoreLogic data for underwriting purposes.
Executive Vice President and Chief Technical Officer Dr. Mahmoud Khater sees real value for insurers and reinsurers in the CoreLogic marriage with EQECAT.
“If you actually start with the uncertainty in the models, the highest uncertainty exists in exposure for any insurance company or reinsurance company,” he said. “There’s a lot of reinsurance where you want to know where is the exposure, what kind of exposure they have, what kind of buildings and all that. So when we do the modeling without this kind of information, we have to make assumptions.
“Making assumptions means uncertainty, so there’s all this good data within the program that would allow us to eliminate most of this uncertainty. It would allow us to know what kind of buildings are there, and then use them to really quantify the value of the buildings, and use that in the processes. So that’s our capacity. It’s very good news for us, and I’m sure it’s very good news for the entire market.”
In effect when a better model is produced it reduces the risks of relying on that model. “We think property is a complex thing to understand,” Kingsley said. “No two homes are alike. No two exposures are necessarily the same. Our objective is to try to make property easy by providing a complete view of risk.”
The United States is not CoreLogic’s only market; it provides similar services in Australia and New Zealand. Discussing CoreLogic’s activities in Australia and New Zealand, Kingsley said that there is a “growing realization” of an under-insurance problem in those countries. “There aren’t adequate reconstruction replacement cost tools available in the market to estimate what would be the reconstruction costs,” he said.
According to Botts, what the tax assessor says a home is worth is nowhere near what it actually costs to replace it. “There’s no independent third party to provide a true replacement cost evaluation. For us, that’s obviously a great market opportunity for both consumers and the insurance industry there,” he said.
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