FireRisk™ by Location, Inc.—addressing one of the insurance industry’s biggest challenges: structure fire losses due to negligent behavior.
Every year, structure fires generate billions of dollars in insurance losses.
The National Fire Protection Association reports that there were 501,500 structure fires in the U.S. (one structure fire was reported every 63 seconds), resulting in approximately $10.3 billion in property damage in 2015 alone.
The most common causes of structure fires are cooking, candles, heating systems, fireplaces, storage of flammable materials, smoking, children playing with fire, and the use or misuse of electrical appliances and systems. All of these most common causes are associated with behavior, and the vulnerability of structures to have a fire if interacted with irresponsible or negligent behavior.
It’s time to account for fire loss with a new method of assessing risk.
Research shows that 30 years ago, you had about 17 minutes to escape a house fire. Today it’s down to 3 or 4 minutes.
The reason? According to a recent study by the Underwriters Laboratory, it’s the proliferation flammable, solid petroleum-based home furnishings.
The impact on insurers? The old focus on speed of fire response is falling apart as a predictor of fire severity. What insurers need to understand is which locations are more likely to have a fire in the first place. Location, Inc. is the first to account for fire frequency and probability to predict fire severity. Welcome to the future.
Today, properties that catch fire burn so quickly that severity models are ineffective. Insurers need to know where fires are more likely to start–before they actually do.
Introducing FireRisk by Location, Inc.
FireRisk, part of RiskSuite™ for Insurance by Location, Inc., is a proprietary solution that takes behavior into account when predicting insurance loss.
The solution generates a FireRisk Score based on three major categories with varying levels of importance: behavior, structure vulnerability, and location.
This new, 3-pronged method of assessing risk better predicts where fires are most likely to occur and become severe, empowering insurers to:
- Price policies commensurate with the real risk. Reduce prices where the risk is lower to capture more policies and reduce the risk of the overall book. Increase prices where risk is greater to profitably write higher risk policies or avoid high-risk, high-loss policies and improve profitability across your book.
- Improve underwriting performance. Instantly assess the risk of fire across your book and when underwriting new policies.
- Target low-risk locations with laser precision. Determine the neighborhoods with the lowest total risk of fire claims to market effectively and attract more low-risk policies.
Accuracy is everything.
Built upon over a decade of research, FireRisk provides over 11 million geospatial points of fire risk. This allows carriers to segment territory descriptions with unprecedented precision.
Testing FireRisk against a holdout data set of over $3 billion in homeowner’s premium, including a mix of very large and mid-tier carrier data where we expect pricing already reflects the use of credit and Public Protection Classification, shows more than a 4.5 times difference in fire loss ratio experience from the lowest to the highest FireRisk category (analyzed with equal premium in deciles).
This represents an opportunity for major lift in premium adjustments. Furthermore, with a 42% leap in loss ratio from category 9 to 10, there is the potential to explore significant adjustments in underwriting bind decisions in the 10th category.
Applying these fire loss ratio results to the $74 billion homeowners insurance industry as a whole reveals the opportunity for the industry to make $19 billion in premium adjustments and reduce claims by $1.2 billion annually. The combination of these two factors produces a significant improvement in overall operating ratio experience.
Put FireRisk to work.
FireRisk helps insurers segment territory descriptions with unprecedented precision and includes:
- Over 11 million geospatial points of risk
- High-resolution census block level granularity
- 100% seamless national coverage for the U.S.
- Normalized data for accurate predictions across the U.S.
- No redlining
Want to see the alternative revenue impact on your own book of business? Contact us today about performing a batch analysis of your policies to highlight your hidden exposures.
FireRisk data contain no red-lining, no data about race, ethnicity, ancestry, language, religion, any protected class, income, educational attainment, or occupations of any kind.