Telematics was an early demonstration of a transformation in the insurance industry from reacting to and repairing damage, to predicting risks and preventing claims. The benefits of this transition are two-fold. First, by understanding the risks presented by any individual insured, insurers are better able to set premiums to match the risk. Low-risk customers are rewarded; high-risk customers pay premiums that match their heightened risk. Second, by measuring and understanding a driver’s risk, insurers can help individuals remediate that risk. An insurer can motivate a driver to drive less, drive more slowly, or park in secured garages.
A similar transformation is taking place in Commercial General Liability for properties Once risks of fire, windstorm, and flood are characterized, major risks for buildings are most often posed by people. These risks include slip, trip, fall, and crowding (e.g. blockage of egress routes, fire code violations). An office building with 100 daily weekday occupants and two security personnel at night, is much less risky than a building with 10,000 occupants, day and night…or a vacant building.
Part of the challenge is that people “load” on a building changes constantly, as tenants change and business uses evolve. The same square footage can accommodate 100 persons in per-person offices or 500 persons in bull-pen seating. One space that welcomes 100 of the same employees each day will constitute a lower risk than the same space that welcomes 1,000 different people in the course of a week.
Getting ahead of the “react and repair” model will improve an insurer’s financial results. It is more cost-effective to predict and mitigate risk and to prevent claims than to react to claims and pay out compensation.
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