Sabrina N. Gordon, Business Reporter

Globe Insurance Company Limited has deployed a geographic information system (GIS) as a monitoring tool to track developments in zones where its policies are written or from which potential business emerges.

The company currently insures property across Jamaica with combined value of J$100 billion.

General Manager Peter Levy said the data collected would guide day-to-day analysis of Globe's insurance underwriting business, but he was insistent in an interview with Sunday Business on Friday that the company would not use the information to deny coverage.

The company has spent more than $20 million on the system, but that is only a portion of the cost.

More efficient

The investment, Levy said, is meant to provide Globe with a more efficient way of assessing risk so that policies can be priced more appropriately, produce better margins on revenues and bring down reinsurance costs.

"We expect our use of a GIS to result in a better-performing, more accurately priced portfolio, which will enhance our ability to secure advantageous terms from our reinsurers," said Levy.

While Levy did not disclose reinsurance costs specific to Globe, he said that across the property- insurance market, 95 per cent of premium income went towards reinsurance cost.

This amounts to approximately $7.9 billion.

"A GIS in the long term will provide information for better decision making which, over time, will give better margins on revenue," he added.

Globe, as far as Sunday Business could determine, is the only Jamaican insurer of the 11 in the sector to employ a GIS.

Property business only

Levy says for now, the system will be used for its property business only, which accounts for about 60 per cent of operations, but could be expanded later. The company also sells motor insurance and other general insurance.

At the end of 2007, gross premium income for Globe totalled $2.2 billion, with just under 50 per cent of the business located in Kingston and St Andrew and the remainder distributed islandwide.

A GIS captures and pre-sents data linked to location, such as buildings, roads and rivers.

Globe has employed an aerial display of the various locations across Jamaica, which allows the company to determine which locations are more prone to disasters, such as flooding, and price that risk accordingly.

"The main implication for selling is that our pricing for property insurance will more accurately reflect the risk represented by a particular building or its contents," said Levy.

If property 'A' is more exposed to natural hazards than property 'B', then the insurance for property 'A' should cost more, he said.

"We, therefore, expect to offer the best deal to people who have the lowest risk," Levy told Sunday Business.

The system has been in use since August, but will not be fully integrated into the company's operations before the first quarter of 2009.

"We have so far had direct costs - that is, money spent on hardware, software, training and data) in excess of J$20 million, and also an undetermined amount of indirect costs (relating to) time spent on development and implementation by programmers, insurance professionals and executives," said Levy.

Available to Globe underwriters

"We expect to constantly be adapting and improving its capabilities, so the ultimate cost is impossible to pin down."

The GIS is available to all Globe underwriters who are required to consult the system - whether it is for new business or policy renewals.

"We will have much more information about each risk that we accept, simply by turning to our computers and finding the risk in our GIS," said Levy.

"The GIS includes measuring tools that will tell us the square area of a building, or its distance from other buildings, or from gullies or other physical features that are relevant to assessing exposure," he added.

"In many cases where we might have required a survey or site visit, we will be able to obtain the relevant data immediately, which will allow us to respond to requests for coverage much more quickly and cheaply."

In addition to company in-house information, data for the system were obtained from the Mona GeoInformatics Institute at the University of the West Indies, the National Land Agency, and Spatial Innovation Limited, one of the consultants used in the implementation of the system.

Consultancy services were also obtained from Carib Analytix; but much of the development of the system, said Levy, was the work of Globe's information systems staff.

The system was rolled out over a six- month period, with initial discussion having started in February.

According to Levy, the company's entire pricing policy may undergo change. For example, he said, there might be a standard rate, which would be adjusted either up or down, based on the level of exposure.

Property risk

"Property close to the sea often bears a higher cost to insure to reflect the risk of damage from wave action during a storm," Levy said.

"If a property is close to the sea but is sufficiently elevated above sea level as to significantly reduce that risk, we will be able to offer a lower premium to the owner."

The company assesses property risk using variables related to the type of construction, occupancy of the building and location.

The GIS allows for a greater level of precision on the location variable.

So, persons living in Kellits, a flood- prone area, may be subjected to higher rates than persons living elsewhere; but not all properties in Kellits will have the same degree of exposure. So, even within the community, the policies will vary in price, said Levy.

But even while the system allows for greater precision on assessing the risk, Levy said that property now considered too risky to insure will not automatically become insurable. But, it should make the process of assessment more efficient.

Cost savings

"There will be direct cost savings in some cases, where we can obtain information from the GIS that we would otherwise have to get from a site visit," Levy said.

"Where there is an event that affects a number of premises in an area, we will immediately be able to estimate how many adjusters will be needed and deploy them more quickly, instead of having to react on the basis of how many reports we receive in the days and weeks following the event."

After Hurricane Ivan, the average settlement time for homeowners' claims was 17 days from expiry of the notification period.

"Using the GIS, we expect to average two to seven days fewer - working out to claims settlement within a maximum of 15 days," he said.

business@gleanerjm.com