A joint presentation by Glenn McGillivray, Managing

Director of the Institute for Catastrophic Loss

Reduction (CMHC) and DMTI Spatial, offered an

insightful perspective on what the insurance industry

can expect in the months and years to come as

they struggle with the impacts of climate change;

and on the role location and visualization can play

in improving overall efficiency, policy development,

customer service and the bottom line.

CATASTROPHIC LOSSES ON THE RISE

McGillivray’s leading presentation addressed the

growing importance of location in real-time risk

management to help businesses face the change in

both the number and severity of natural catastrophic

events in the recent past and projected for the future.

There has been a dramatic increase in natural

catastrophe trends and insured losses in Canada

and globally as a result of hydrological (river and

flash floods, storm surges and landslides) and

meteorological (severe weather, winter and tropical

storms, hail, tornados). In particular, storm losses in

Canada have been earmarked as a key issue for the

insurance industry moving forward.

Since 2009, Canada has experienced losses in

excess of $1 billion annually, with the peak occurring

in 2013 at over $2 billion in insured damage. In fact,

2013 delivered Canada’s costliest and third costliest

insured loss events of all time (the Southern Alberta

flood in June and the GTA flood in early July),

relegating the 1998 ice storm to second place.

It was also the first year to record $2 billion in natural

catastrophes, and the fifth consecutive year of

billion-dollar events. (Previous billion-dollar years

were 1998 due to the ice storm and 2005 with the

August 19 GTA rainstorm).

6 steps to unlocking the power of location:A guide for insurers in the wake of climate change

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CLIMATE RELATED

EARTHQUAKES VOLCANOES

INSURED LOSSES BY PERIL

GEOPHYSICALEarthquake, volcanic eruption

METEOROLOGICALSevere weather, winter & tropical storms, hail, tornado

HYDROLOGICALRiver & flash flood, storm surge, landslide

CLIMATOLOGICALHeatwave, freeze, wildland fire, drought

DMTI Spatial™

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HOME INSURANCE: A DECLINING PROFIT CENTRE

One of the more disconcerting issues for the industry is that

homeowner insurance has tended to be more stable than

auto, and therefore more profitable and easy to manage.

Given the events of the past five years, however, homeowner

insurance is performing far worse and can no longer be relied

upon as a profit centre under the current circumstances.

McGillivray cited three causes: more people and property

are at risk due to population density in urban areas, aging

infrastructure and climate change.

A PRESSING NEED FOR BETTER DATA

When combined, these factors are increasing liability and

exposing directors and officers to risk. In addition, fire

insurance has been eclipsed by water damage claims, a

trend that that is having a significant impact on how policies

are quoted and written, and driving a pressing need for

accurate, up-to-date location data.

Larger insurers with in-house resources such as

climatologists, GIS experts, seismologists, etc. have engaged

in a proliferation of modelling over the years to manage this,

yet other smaller organizations have been restricted by a lack

of expert staff resources. Insurers are not the only parties

that can benefit from accurate location-based intelligence.

Regulators also need to know why companies do what they

do, how they do it and what will happen in the future.

McGillivray pointed to a number of challenges in terms of

current location data practices. Canadian government

weather hazard data is not housed in a central repository

and spread over multiple departments; the format and

quality of this is inconsistent; some data has been destroyed

or cut back; and other data is not digitized. There are

also discrepancies in terms of accountability for the data.

Wildfire and flood measurement, for example, is a provincial

responsibility, and can vary considerably in terms of quality

and format. Flood mapping has not been kept up to date

since the 1980s.

DMTI Spatial responded to these data challenges by outlining

six steps to leveraging location that will have a significant

impact within the entire ecosystem of an insurance

organization and on the breadth of the value chain.

6 steps to unlocking the power of location

“An increase in water damage

claims is impacting how policies

are quoted and written, driving

the need for accurate, up-to-

date location data.”Source: Institute for Catastrophic Loss Reduction

Toronto, Ontario. 2013. $940 million insured damages.

Calgary, Alberta. 2013. $1.7 billion insured damages.

Airdrie, Alberta hailstorm. $450 million insured damages.

DMTI Spatial™

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6 steps to unlocking the power of location

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UNDERWRITING AND CLAIMS

The first step involves the underwriter and claims community, where location-based data

can help participants understand the risk associated with the policies they have today, and

visualization capabilities can allow users to quickly grasp the potential of information in

policies for the future. Organizations can use location to build predictive models based on a

better understanding of the customer and the impact that hazards and catastrophic events

may have, translating this insight into policy structure and pricing.

OPERATIONS

The second area is operations, or the ability to leverage location data and visualization to

assimilate disparate pieces of information to support instantaneous decision making, based

on a consistent methodology and approach to managing risk, which can generate productivity

improvements across the underwriter community. According to a Deloitte study, 85 percent

of a corporation’s databases can be logically and appropriately linked using location data.

BACK OFFICE

Step number three involves using location and visualization to improve back office functions,

driving proactivity around portfolio analysis. For example, a claims environment can be mapped

out against an entire portfolio in order to understand potential or emerging trends and make

aggregated decisions around policy writing. This can help the underwriter to better define the

zones that are actually impacted by catastrophic events or other factors, and investigate in

more granular detail before making decisions around levels of restrictions needed to protect

a business portfolio, manage accumulation and improve organizational performance.

Potential RisksHow can you constantly assess risk to minimize the impact on your book of business?

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6 steps to leveraging location

DMTI has worked extensively with CMHC, Genworth and Canada Guaranty Mortgage Insurance to develop ways to use location information to better manage business.

DMTI Spatial™

6 steps to unlocking the power of location

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MARKETING

The fourth step is marketing. Location can unlock different data sets so that insurers can find

new customers, gain a better understanding of existing and potential customers, determine

how to serve them as efficiently as possible and ultimately, increase profitability.

POST-EVENT ANALYSIS

The fifth area is post-event analysis and activity. DMTI’s post-event analysis and service is

designed to help organizations manage crises, as well as build a history that can be used

to manage risk and examine a portfolio in more detail. In the case of the Calgary floods

for example, DMTI Spatial was able to provide financial institutions with address-by-address

information about properties impacted by the flood and to what degree they were affected.

This enabled insurance organizations to service customers more quickly, and proactively

reach out to customers.

TECHNOLOGY

The final step is technology implementation, including cloud-based architectures and

infrastructures that DMTI has developed to deliver the right information in the right manner

in milliseconds. A second technology benefit is highly scalable infrastructure – last year DMTI

processed over 450 million transactions around address recognition and location information

– and the final consideration is the need for access to Big Data, which DMTI delivers via high

precision geocoding of information.

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MarketingProfile your best customers, and find your best prospects.

DMTI Spatial™

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To learn more about how we can help your business,

please contact us at info@dmtispatial.com.

ABOUT DMTI SPATIAL

DMTI Spatial, a member of the Neopost group, is the

Canadian market leader in location based information

and data quality. DMTI Spatial’s award-winning solutions

and high-precision data is relied upon by Global 2000

companies including Google, Apple, top Canadian

financial institutions, telecommunications companies

and government agencies.

We help businesses grow through actionable insights

uncovered by leveraging location to bring together

and analyze a growing world of data. We make

breakthrough products that change the way people

use location. Learn more at www.dmtispatial.com