The New Digital Age for Insurers

The Insurance Valuation Services practice of Duff & Phelps, continues to evolve as insurers change their traditional approach to underwriting. For decades, insurance companies have relied on the insured to provide the bare minimum information required to price risk, with no way to verify this data. Today, in this digital age where many businesses are governed by the regulations of the Insurance Act, risk transfer metrics must become more sophisticated.

To satisfy market demand, we have developed new portfolio review services, risk heat mapping services, and the ability to carry out virtual site inspections. Through the interactive deliverables we provide, carriers can now access critical data themselves to ensure compliance with regulations, accurate pricing and alignment with industry best practices.

Portfolio Review Services

We work with insurance companies to analyze very large portfolios by entering property information into our proprietary software to check the adequacy of the insurance coverage declared.

This includes a review of:

• The property’s physical address
• Current insurable values against peers within the portfolio
• Current insurable values compared to our valuation database
• Gross floor areas compared to measurements from aerial imaging

With a real-time risk overview of their entire portfolio of assets, our insurer clients can prioritize risk engineering visits, better price their premiums by understanding inaccuracies and shortfalls within their portfolio, and make more informed decisions about insuring certain risk.

Over the past six months, we have conducted portfolio reviews of over 18,000 buildings worth $56 billion. Our reviews found that 35% of properties were insured below the appropriate value ranges derived from our proprietary database. The shortfall is estimated at up to $13 billion.

An example portfolio review dashboard is shown below.

Risk Heat Mapping Services

Geospatial valuation data sets are one of our new reporting capabilities for industrial manufacturing sites. These data sets display a physical distribution of values and can be viewed in any geographic information system (GIS). They provide two main advantages over traditional reporting:

• They facilitate estimated maximum loss (EML) calculations, whereby a flood, fire or blast radius from different risk scenarios can be directly translated into monetary damage.
• Value heat maps can be created to view and analyze value concentrations, thereby targeting high- and low-risk areas within a plant and identifying any anomalies to be explored further.

These risk maps can be integrated into the interactive dashboards that are delivered as part of larger engagements.

We’ve found that our industrial clients have been able to achieve reduced premiums after implementing our heat maps. Clients can better predict (and support) the anticipated value destruction caused by an insurable event if they have a refined distribution of value with a more accurately defined blast radius by production area.

An example of a risk heat map is shown below.

Virtual Inspections

Over the past year, we have remotely inspected a broad spectrum of facilities using smart technology, including those used for manufacturing, mining, metals, chemicals, plastics and refineries. Since the onset of the COVID-19 pandemic, smart glasses, mobile phones, tablets and headsets have necessarily become the tools of choice. Virtual site inspections (VSIs) have ensured a degree of continuity, allowing us to sustain our services in an era of travel restrictions and national lockdowns. Enhanced pre-inspection data collection and analysis streamline the process as we work flexibly with the client to design the most efficient virtual survey. While our output and reporting remain as detailed and robust as ever, our clients can realize significant travel-related cost savings.

Fixed-Asset Case Study— Sophisticated Buyers

Recently, one of our U.S. clients acquired a refinery in Europe. To satisfy IFRS 3, business combinations they were required to have a purchase price allocation (PPA) carried out within the first year post-acquisition. Noticeably efficient in their use of internal time and resources, the client was quick to identify the potential for a simultaneous PPA-driven site inspection, insurance valuation and risk engineering survey.

Our team joined the virtual survey with the client, insurance and risk teams. We were able to gain 360-degree clarity of the asset values, insurance policy and risk profile—a position we historically could only have imagined.

As part of this fixed asset work, we provided a heat map and identified assets over an agreed-upon monetary threshold, segmented by areas of concentrated value. Secure online access to the heat map and valuation data was provided to permitted stakeholders at the client’s request.

Our team is proud to be able to deliver multiple benefits to clients via one engagement.

Future

By 2023, our insurer partners will have consolidated information from multiple third-party data providers into their own intelligent underwriting systems. We aim to be an essential link in the data chain, allowing clients to seamlessly use our growing database and smarter algorithms for their benefit.