Property risk: Getting the full picture

Digital aerial imagery, satellites, drones, LiDAR - the level of detail around commercial property risks now accessible to the insurance market is reaching new levels and that will be of keen interest and potentially a concern to property risk managers, responsible for managing insurance costs.

The insurance sector is not just using imagery and data to help underwrite and price risk at point of quote, this deep level of insight around the characteristics, condition, use and location of commercial properties is now starting to be applied for use during the lifetime of the policy and at point of claim. This is particularly true for older, historical buildings.

While the level of detail insurance providers require generally surpasses that needed by risk management professionals, the way in which the insurance sector is using advances in technology and data visualisation provides a good guide to how far risk managers could extend their own understanding of their property risks as well as the risks related to geographic locations.

The devil is in the detail

Where once aerial imagery relied on a sunny day, clearance for take-off then a team of surveyors to build a map, today aerial imagery is instantaneous, high resolution, autocorrected and geocoded so that the image is tied to a point on earth. That means when you type an address into a mapping system up pops that precise image in clear detail.

Because this imagery has become much more enhanced, a crack in a roof tile may now be visible for instance, it is possible to look for finer detail around the buildings captured. In the US the rebuild cost of a roof is expensive and a high proportion of roofs are paid for by insurance as they typically fail within 20-30 years. As a consequence, the insurance market is now looking to use this imagery to understand the roof type, its condition and any existing damage.

Algorithms are being built by the insurance sector to use imagery to automatically identify any concerns with the condition of roofs, the presence of solar panels, air-conditioning units. There may come a time when a straightforward claim will be paid automatically using an algorithm to determine the damage, based on the imagery collected. It might be some time off but it’s a process already beginning in motor insurance.

LiDAR creates 3D models

In many instances, aerial photography and LiDAR is collected at the same time. LiDAR is a remote sensing technology which uses the pulse from a laser to collect measurements which can then be used to create 3D models and maps of objects and environments. While it is one of the technologies to underpin the driverless car, it is already proving valuable in helping model for environmental risks using predictive analytics.

Digital Surface Models can be created from LiDAR which can calculate the height of a building, how many floors it has and the total square footage. 

Oblique photography from a side view may be able to see the façade view of buildings – the windows, number of floors, building construction type. Standard ortho-recitified aerial photography is a plan view and can therefore help identify the presence of solar panels, condition of flat roofs etc, to enable insurers to understand a lot about buildings. Along with scheduled aerial surveys they also provide surveys of disaster zones.

Drones help to develop building plans

Drones are becoming another key feature in understanding property risks, particularly for specialist buildings. Using drones and LiDAR enables the exact height and measurements to be calculated for a building where no plans exist due to its age. This is a process now starting to be adopted as a precautionary measure to ensure there is some record of the building should a fire occur. Drones are also being used in flooding events when a river or defence is breached to understand the extent of the water and areas impacted.

Once the area is surveyed, geospatial data visualisation tools allow a polygon to be drawn around that area so that insurance providers can get loss adjusters to the scene.

Environmental and perils risks

In addition to square footage, construction, roof type, height, window sizes, imagery can determine where a property sits in proximity to other buildings. This is important for understanding fire spread and local environmental risks.

As the cost of LiDAR technology has fallen, the flood, fire and subsidence risk models created through the images captured have become much more detailed. 3D images of the terrain can be built showing buildings, trees, water levels for the whole of the UK. The insights provided are particularly valuable in flood modelling, as the data can be coupled with soil type, average rainfall data and river gauge monitoring and used to accurately predict where water will go in a flood.

Map View allows a risk to be assessed right down to building outline level, for a single building or an entire portfolio of properties.

This type of insight is becoming hugely valuable as climate change brings increasingly severe weather. The average commercial insurance claim according to the ABI for Storms Ciara and Dennis earlier this year was over £56,000 with a total of £85m paid out to date.

Accessing this property risk data and imagery has been supported by the development of SaaS-based applications. This means risk and insurance managers can get quick and easy visualisation of risks in their property portfolio.

By keeping all of their data in one easily accessible location and format, they can take a standardised approach to risk assessment and easily adapt to changing market conditions, with enhanced visibility and insight into property risks.

By understanding and using some of the tools being adopted by the insurance market, property risk managers can ensure they are on the front foot for managing their property risks and insurance costs.

Richie Toomey is senior manager, Commercial Insurance at LexisNexis Risk Solutions UK and Ireland