By Jonathan Guard, Director, Commercial Insurance at LexisNexis Risk Solutions, UK and Ireland
The risks associated with empty premises versus those that are occupied are very different.
There can be a greater risk of vandalism and burglary. The European Parliament in Brussels was victim to a lockdown burglary, and closer to home, Police Authorities have been urging businesses to ramp up their security measures .
Arson is still one of the leading causes of fires on commercial premises . These claims are generally much higher in cost than fires started for other reasons because they often occur when a property is vacant and the fire has time to spread. Fire claims submissions have, according to a recent report , seen a spike of 40% between 1 May to 11 June 2020, with commercial property including outbuildings and outside areas accounting for 63.4% of total fire claims.
In addition to opportunistic crime like arson, insurance providers must now factor for the risks associated with problems emerging in the insured building, such as escape of water or electrical fires, which may go undetected for much longer than if the building was occupied.
The risk of claims fraud also needs to be considered as Government support measures ease back and firms face increasing financial pressure. Throw into the mix an extreme weather event, further lockdowns potentially hinder the ability to fully investigate claims, and the risk of fraud becomes even greater.
The market is very conscious of the fact that many businesses whose employees were able to transition to home working will be paying for their workspace and associated insurance even though the space is not being fully utilised. They will be looking for solutions from the insurance sector and from the commercial property market to help them get back on their feet and operate with potentially lower overheads and reduced physical presence.
At the same time, insurance providers must protect themselves from potentially rising claims costs in order to deliver premiums at a price businesses can afford to pay.
They need to get a comprehensive, multidimensional view of risk in an instant. It requires a combination of data regarding the characteristics of the property; its location; the individuals behind the business; environmental risks; and soon, past claims for both the property and the business, direct into the insurance eco-system to support commercial e-trading. One consolidated view at point of quote using real-time data would be a big step forward in delivering cover appropriate to the risk.
Getting on the front foot in an extreme weather event will be even more vital in a COVID-19 environment. Live data from the Environment Agency, Met Office and other organisations can help insurance providers to visualise, track and act on what is happening in near real-time and understand where their exposures and accumulations lie.
It also allows them to focus resources on supporting policyholders they have identified as being at risk from an event – and equally those who are not.
Data integration, digitisation and automation are key to how the commercial property market can adapt for both the short and longer-term change to office occupancy and where, when and how we work as a consequence of the pandemic.
The value of data enrichment for improved quote processing times, reduced referrals and better customer experiences in commercial property is already well understood. Just prior to the pandemic, a study found 77% of commercial property insurance providers are using or planning to use data enrichment. Perils data on flood, fire, subsidence risk has the highest value to the market, followed by insights on prior claims related to the property and the policyholder.
However, only 23% said they were using mostly digitised underwriting and under half of those surveyed – 42% - said their application process was all or mostly digital. Now that the environment the commercial property market is operating in has altered significantly, the appetite for data and digitisation to understand risk faster and with a higher degree of accuracy, looks sets to grow.
Already the market can access perils risk scores alongside publicly available data and identity verification data, property and business data for automated e-trading based on the complete picture of risk for commercial property quotes and renewals. Perils risks can be visualised at individual property level, at point of quote, or across an entire book of business to calculate exposure in real-time, plan resourcing, identify market opportunities and spot areas of accumulations in the UK’s commercial hubs.
Digitising the underwriting process with these data points will also allow the market to take advantage of the latest innovations in commercial property risk insights coming down the line – from deeper insights around flood risks to claims history. This will help support the development of new types of cover and fair pricing for businesses looking for increased value and a better customer journey from their insurance provider.
With predictions of a hybrid future of work with people mixing home and office working , accurate and timely data insights will help support the demand for more flexible insurance covers that respond to flexible working practices.
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