What Hidden Data Do Insurers Use To Write Commercial Policies?

As a business or property owner in the realm of commercial properties, securing the right insurance coverage is paramount. Whether it’s a requirement from your lender or a decision for your own peace of mind, understanding the factors that influence insurance rates is crucial. In recent times, there’s been a notable shift in the insurance landscape – insurers are increasingly relying on alternate data, their so-called “secret sauce,” to assess and rate policies.

The Evolution of Insurance Evaluation

Traditionally, insurance brokers and agents have utilized demographics and property criteria to evaluate and rate insurance policies. However, the landscape is changing rapidly, and this year, more insurers are turning to alternate data sources. This shift introduces a layer of complexity as insurers seek to refine their risk assessment methodologies.

Decoding the Secret Sauce

The term “secret sauce” refers to the undisclosed algorithms and data sources that insurers now incorporate into their policy evaluation process. For property owners, this can be a double-edged sword. If your property aligns positively with these alternate data sources, it might lower your risk and potentially reduce your premiums. Conversely, if your property carries higher risk factors that were previously under the radar, it could result in increased premiums.

Beyond Traditional Factors

In the past, property evaluation focused on factors like building materials, number of floors, and overall structural considerations. The shift to alternate data involves a broader set of considerations, such as proximity to a river (risk of flooding), crime rates in the area, distance to emergency services, and the types of businesses surrounding the property.

Navigating the Uncharted Territory

The confluence of data markets presents an entirely uncharted territory for insurers and property owners alike. The use of alternate data allows insurers to tailor their risk assessments more precisely. For property owners, this means that seemingly unrelated factors could influence your insurance rates. For instance, if your property is in close proximity to a fire station or has low crime rates, it might be worthwhile to explore how other insurers assess these factors.

Taking Control of Your Risk Profile

If you find that your insurance policy’s premium has changed, either positively or negatively, it’s worth investigating the data sources used by your insurer. If you believe your risk factors have been inaccurately assessed, consider shopping around for quotes from other insurers, even if it means sticking with your current broker. Different insurers may use varying data sources, and this could lead to a more favorable risk evaluation for your property.

Seizing Opportunities for Risk Mitigation

The shift towards alternate data opens up opportunities for commercial property owners to actively manage and mitigate risks. Insurers are increasingly interested in obtaining competitive insights from alternate data, and understanding customer behavior is a key focus. As a property owner, this means you have the potential to influence your risk profile positively.

Consider exploring options with insurers that leverage specific data points, allowing you to tailor your risk management strategies. For example, if the storage of certain inventory raises your risk profile, adopting just-in-time delivery practices could be a strategic move.

In a landscape where data is king, commercial property owners should stay informed about the evolving methodologies insurers employ. By embracing the potential of alternate data, property owners can not only navigate the changing insurance terrain but also actively influence their risk profiles for more favorable outcomes.

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