One of the regular topics of this blog has been the importance of having the best data for the job when trying to understand risk, as well as understanding what can and can’t be done with the data at hand. Earlier this month (March 2015), there was a fantastic case study showcasing this principle in action in the U.K. flood insurance market.
I encourage you to read the full case study, but here are the highlights:
By combining a more refined flood model with an innovative delivery mechanism, insurers in the UK are able to offer products they could not previously. What better case study can there be to illustrate how the ability to easily access the right information can improve business?
The other, more subtle, aspect of this story is that it illustrates the notion that uncertainty is expensive in insurance. In this case, homeowners were paying for the uncertainty of the flood risk at their home because it wasn’t certain enough to be economically insured. As the information matured and the uncertainty was reduced, the associated cost was reduced dramatically. Homeowners in high flood risk areas can now save money with sensible insurance practices.
Congratulations to JBA and emapmart on this new product. It sure looks like a winner, and illustrates the innovative solutions being nurtured in the United Kingdom for managing flood risk.