Micro-Censusing: Risk Rating 2.0 And The Future Of Flood Insurance (Insurance Thought Leadership)

Micro-Censusing: Risk Rating 2.0 And The Future Of Flood Insurance

  Wednesday, May 13th, 2020 Source: Insurance Thought Leadership

The ability to micro-census — that is, to gather granular data about individual homes and businesses and use it to inform underwriting — will lead to the biggest changes in flood insurance since the launch of the National Flood Insurance Program (NFIP) in 1968.

Most visible among these changes will be the transformation of NFIP policies and the rise of private flood insurance, which micro-censusing makes possible (read: potentially profitable at scale) for the first time.

Here, I’ll examine the rise of micro-censusing in insurance; its likely applications in the flood market; and the potential impact on NFIP and private products, the agents selling them; and the Americans they’ll protect.

In the last two decades, innovation in the insurance industry has been powered by better data. Data collection from smart devices is changing how health and auto insurers price policies, and data from services like Google Maps is changing how underwriters assess business insurance applications.

In homeowner’s insurance, providers are pulling publicly available, address-specific data — from roof type to proximity to a fire hydrant — and feeding it to algorithms to assess risks. All of these can be considered examples of micro-censusing because they use data at the individual rather than demographic level to determine risk, which makes for much more accurate assessments.

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