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Insurance-to-Value Tools Help Keep Policies Real
July 2007An accident or catastrophe brings the moment of truth between a carrier and a policyholder. All too often, it's the only interaction between the two parties. The result is a relationship vulnerable to unwanted surprises.
For example, a policyholder suffering a loss because of a fire may find a policy failed to cover enough of the current value of the property to make it whole again. Years of appreciation as well room additions and remodeling may not have been updated in the policy.
To avoid such nasty surprises, -which can lead to lawsuits or even state regulatory action, carriers are increasingly turning to insurance-to-value (ITV) tools to employ technology, supplemented by data mining, to capture accurate valuations for the claims management process. ITV tools promise to increase the accuracy of underwriting valuations and enable carriers to take a proactive role in the valuation. Such tools can regularly track and adjust valuations as markets change, reflecting rates down to the ZIP code level.
To a large degree, those tools are having the desired effect, observers say. In its most recent reports of undervaluation in housing properties, Los Angeles-based Marshall & Swift/Boeckh (MS/B) estimates that 58% of the residential housing stock in the United States is undervalued for insurance purposes by an estimated 21%. That's down significantly from 2000, when MS/B calculates that 73% of properties were undervalued at an average rate of 35%. MS/B attributes part of the shift to the tools and part to other best practices.
NEW FRONT ENDS
Besides proving their mettle in the claims management process, ITV tools can also deliver at the front end and renewal phases of the process, as well as in underwriting, to help with valuation determinations. Some carriers may be getting the message that such solutions can be useful across the entire enterprise, not only for claims administrators but also for underwriting departments.
Increasingly, such tools are Web-based and therefore accessible via portal through a standard Internet browser. That enables collaboration and transparency of information with all parties across the enterprise to communicate changes in valuations and increase understanding of what levels of coverage are in place.
"Carriers are spending more money on updating and actually putting in new claims systems, new back-end systems, than they have probably in the last 50 years," says Anthony Hetchler, vice president of claims for MS/B. "That's driving a lot of this collaboration. Up to this point, the systems have been very clunky, old mainframe-based applications-very difficult to modify, very difficult to share information. The new platforms that they are building and installing are actually breaking down those barriers, and it's catching fire very quickly. The No. 1 initiative among executives on the underwriting and claims side is better access to meaningful business intelligence."
Such across-the-enterprise integration of ITV capabilities has been put into place at Bunker Hill Insurance Co., which has headquarters in Boston, Mass. Bunker Hill employs HomeValue from Jersey City, N.J.-based ISO, the Insurance Services Office, to provide valuations on policyholders' homes.
"Every risk goes through a HomeValue evaluation before we write it," says John Tierney, president of Bunker Hill. He notes that his company coordinates the ITV tool with front-end policy entry systems.
Tierney observes that the ITV tool plays a key role in three phases of the process. "The first is in writing a new business application," he says. "It has to be run on every risk when we're doing a new business application-to verify eligibility."
Next, Tierney continues, "it's a tool that we use when doing inspections on new business. When we go to the house, and have all the home value information in front of us, it makes inspections much more efficient for the inspector since he already has the information before he shows up."
Finally, Tierney says, the tool is employed within Bunker Hill's claims department. "Any time we have a claim, the claims adjuster gets a copy of the latest home value report for that house," he says.
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