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Natural Disasters, Modeling and the Insurance Industry

Monday, December 3rd 2012
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Summary:

Despite the uncertainty of trying to predict future events, especially natural disasters, it’s possible to make well-informed risk estimates by taking into account data on past disasters, asset values and weather trends. The key challenge in this era of big data is coming up with an efficient way of extracting meaningful insights from vast quantities of information. Christopher Guider of GfK GeoMarketing explains how geospatial modeling can accomplish that task.

Directions Magazine (DM): Please describe the applications that GfK GeoMarketing supports in the insurance/reinsurance area.

Christopher Guider (CG): GfK GeoMarketing is uniquely positioned to provide top-quality geodata to the insurance industry.  We're the official supplier of the CRESTA zone maps, which are the established risk management tool among insurers and reinsurers. We also specialize in the provision of postal boundaries, which comprise an ideal basis of planning in the insurance industry.

We have the largest supply of postal and administrative map data on the market, with complete global coverage and regular updates. We also put a great deal of effort into digitizing very granular coastlines and city center areas, as these are typically regions with dense concentrations of high-value assets that are vulnerable to natural catastrophes.

Our digital maps function as data repositories that allow users in the insurance industry to organize, add and cross-reference large quantities of information. This information is stored in tables linked to the maps, which means the data can be further analyzed and then displayed on the maps for added insight.

Our cartographic basis supports the full range of applications in the insurance industry, from modeling catastrophe scenarios, aggregating exposure data and comparing loss sums to calculating loss estimates, adjusting premiums and carrying out internal and external reporting activities. Map users can work across the full range of their market or drill down into maps for more detailed planning and analysis.

DM: Can you describe a little more about the Japanese earthquake and tsunami case study that you'll be discussing on your Dec. 5th webinar?

CG: The webinar will look at the 2011 earthquake and tsunami off the coast of Japan as a way of concretely demonstrating specific applications of digital maps in the insurance industry. For example, I'll show how maps can be used to visualize impacted locations and gauge damages. I'll also show how to generate loss estimates by cross-referencing information on insured values with exposure data.

Participants will learn about the flexibility digital maps offer for planning and analyzing data at a wide range of regional levels. For instance, I'll demonstrate how maps can be used to aggregate loss sums and visualize this information at different levels of detail depending on the reporting task at hand.

The webinar thus gives participants a template for how they can use digital maps to carry out common risk management tasks.

DM: What challenges are risk modelers facing in trying to establish reasonable estimates of risk?

CG: There is always an element of uncertainty when trying to predict the future. Even so, it's possible to make well-informed risk estimates by taking into account data on past disasters, asset values, weather trends, etc.

One of the key challenges is making sense of this mountain of data, much of which must be continually adjusted. This is where a geospatial approach pays dividends: by linking this information and visualizing it on digital maps, users can illuminate trends, relationships and patterns that would not otherwise be apparent. This approach yields deeper insights into current risk levels and estimates of future risk.

Simply put, maps allow users in the insurance and reinsurance industry to better organize, link, display and analyze the immense amount of data involved in the estimation of risk. Companies that adopt a spatial approach to risk planning are thus better able to manage their markets and effectively communicate the results of their analyses internally and externally.

DM: What other industries or use cases would benefit from similar treatment?

CG: Some uses of digital maps and geodata are very specific to the insurance industry, but the basic spatial approach has nearly universal application to all industries and sectors: data are yoked together via a shared geographic component such as postcodes and then displayed on digital maps. Additional insights emerge by using GIS software to further analyze the data and visualize the results.

The key challenge in this era of big data is coming up with an efficient way of extracting meaningful insights from vast quantities of information. A spatial approach is an ideal solution, because the vast majority of business and market data have a geographic component. This makes it possible to link this information to digital maps and then visualize the many trends and relationships hidden within the data.

It's not enough to simply have access to large quantities of data. This information only becomes worthwhile when important patterns are extracted and identified. A geospatial approach does precisely this, turning mere information into valuable insights.

DM: Tell us a little bit about your background. How did you get from a Ph.D. in Comparative Literature to working for GfK GeoMarketing?

CG: That's a bit of a detour, isn't it! But actually this transition developed quite organically. During my graduate studies, I became increasingly interested in working in a more hands-on field that focused on applied knowledge rather than theoretical abstractions.

I was eventually drawn to the geospatial industry because I could see that there was enormous potential in applying these technologies and approaches to business practices. I wanted to be part of a field that was rapidly growing and poised on the cusp of new technological developments.
 
I then came across GfK GeoMarketing, a Germany-based company that offers innovative spatial solutions and consultancy. I was impressed by the company's commitment to helping businesses from all sectors take a geospatial approach to managing their operations. It seemed clear that this industry was destined to grow exponentially, and this has certainly proven to be the case.

So I decided to get on board, and I've never looked back. Today I'm more convinced than ever that a geospatial approach will play an increasingly dominate role in business planning and analyses in the years to come. In this era of instant access to almost unlimited volumes of information, there's a vital need for a way of making sense of these data and extracting meaningful insights from them. And that's exactly what a geospatial approach does.

Editors’ Note: To find out more about the applications of geodata in the insurance industry, register for GfK GeoMarketing's Directions Magazine-sponsored webinar, "Risk Analysis & the 2011 Tsunami in Japan: Digital Maps in the Insurance Industry" on December 5 at 10AM EST.

Photo credit: The photo used in this article was taken by editor in chief Joe Francica in Mantoloking, New Jersey showing homes that were damaged by Hurricane Sandy.
 


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