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July 31st, 2008
Insurance Companies Lose Out On Millions in Lost Revenue

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PR – A study by Britain’s
national mapping agency exposes potential lost profits reaching millions of
pounds because properties are inaccurately classified.
Following last year’s floods, which cost the UK insurance industry an estimated £3 billion,**
Ordnance Survey conducted analysis of more than 270,000 addresses located in Peterborough, Kingston upon
Thames and Carlisle. Using OS MasterMap, its
large-scale geographic database, and detailed historic data on flooding from
the Environment Agency, Ordnance Survey has established that more than a
quarter (26.7%) of properties could be inaccurately classified as being at risk
of flooding.

 

“Buildings situated in specific postal‑code areas are often
automatically pre-marked as ‘at risk from flooding’, which our
analysis proves is very often not the case in reality,” says Sarah Adams, Insurance Sector Manager at Ordnance
Survey. “As a result, insurers could be overlooking or offering,
uncompetitive quotes for certain addresses, and are losing out on potential
revenues. By extrapolating our findings to a national scale, the problem is
likely to be costing insurance companies millions of pounds every year in lost
opportunities.”

At present, many insurance companies are using risk assessment methods that
profile buildings based on their postcodes, but this leaves a large margin for
error. Even though a property may never have flooded and is at no real risk,
they can be penalised simply because they are in the same postcode area as
high-risk properties. 

 

However, insurers using geographical information systems (GIS), which
focus on analysing individual households rather than postcodes, can better
assess the real risks involved and calculate appropriate premiums accordingly.
This avoids the problem of low-risk houses being refused insurance or quoted
unnecessarily high premiums. GIS users can offer a better deal to customers
when many of their competitors are working on inaccurate data.

 

Digital mapping, such as OS MasterMap, allows insurers to look at each
property individually when considering its risk profile. When looking at flood
risk, height and the distance from the nearest body of water are among of the
primary factors. A detailed map gives the insurers the opportunity to “see”
the location of the property in detail and make a better informed decision as
to the risk that particular property affords.

 

OS MasterMap is Ordnance Survey’s flagship large‑scale
geographic database and was used for the research project. It contains
approximately half a billion uniquely identified geographic features and is
updated with an average of 5,000 changes every day. It records every fixed
feature of Great Britain
larger than a few metres, all in one continuous digital map. This creates a
detailed database containing the most up‑to‑date information
available to insurance companies at just the touch of a button.

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