1. Field of the Disclosure
The disclosure relates generally to the processing of data related to the subject of an insurance policy and, more particularly, to a system and method for segmenting risks at the point of application for insurance by calculating a pre-screening risk assessment score based on data received during an application process.
2. Brief Description of Related Technology
Applications for insurance, particularly for policies covering high-value items such as homes and other improvements to real property, typically require an assessment of risk to determine policy coverage limits of the insurer and payment rates for that coverage to be made by the prospective insured (i.e., the applicant). This risk assessment, or underwriting process, normally addresses a combination of significant sources of risk, for example, the risk that can be attributed to the property itself, and the risk that can be attributed to past behavior or other characteristics of the applicant. A physical inspection of the property often provides the measurement of risk contributed by the property itself, while an applicant's credit score often provides the measurement of risk that is likely to be contributed by the applicant.
Inspection reports have long provided valuable information in the underwriting decision-making process. Typically, a formal application process initiates the need for an inspection of the item or property to be insured. In the past, the application may have included requests for basic contact information and rudimentary details of the dwelling to determine if the property and applicant should be contacted for further detailed information or to schedule a physical property inspection. For particularly valuable items, such as a house or other real property, this inspection is typically conducted by a trained professional who travels to the property and conducts the inspection. Property inspections are typically performed by insurance agents or other designated individuals deployed in the field. Details that are physically collected about the property (e.g., the dwelling) are recorded on hardcopy or electronic forms designed to capture data related to a number of predetermined property characteristics. For instance, the inspector may utilize a number of checkboxes or placeholders on the form to identify attributes of the dwelling, such as the type of roof and siding.
Insurers have often outsourced the process of obtaining property inspections. For example, a commercially available service provided by the assignee of the present application (under the trademarks WIDE and MAPS) routes orders for property inspections in an automated fashion to an appropriate individual (e.g., a local inspector) in the field. An inspection report is then generated in an automated fashion for electronic delivery to the insurer requesting the inspection. The service thus facilitates the front end data gathering tasks, leaving most, if not all, of the analysis of the inspection data and information for the insurer. That is, such services generally did not directly assist the insurer in the processing of the inspection data and information.
One exception involves a replacement cost calculation that provides an estimated cost of rebuilding any structure in the event of a total loss of property. Replacement cost calculators, or calculation services, utilize one of many industry standard models, and are available from a number of providers, including Marshall & Swift, XactValue, and e2Value. In some cases, the cost estimate is provided to the insurer with the other inspection data and information. The calculation relies on certain data or information collected via the inspection. In any event, the manner in which the input data is provided to the calculator and the manner in which the resulting cost estimate are communicated have been automated by, or within, the above-described property inspection services. For example, the calculated estimate has been displayed as part of an inspection report provided to the insurer. The insurer then compares the estimate with a coverage level of the application or current policy to determine whether an underwriting referral should be generated. In some cases, the comparison has been conducted as part of the above-described property inspection services.
More recently, additional capabilities have been added to the inspection data collection process to assist the insurer in other ways. For example, functionality has been developed to provide convenient access to the inspection information and data. Specifically, the MAPS™ service made available by the assignee of the present application provides data integration capabilities so that insurers can download inspection data on-line and establish computer-to-computer data interfaces. Through such interfaces, an insurer analyzes the inspection data using database tools that support, for example, searching and sorting operations. In some cases, the inspection data has also been organized via a number of categories predetermined by the insurer. More specifically, such organization results in the placement of each inspected property (or the associated inspection report) in a category, or stack, according to criteria set by the insurer. For example, each policy renewal subject to a major condition (e.g., a rotting roof) may be placed in a separate category dedicated to those policy renewals requiring a letter to be sent to the insured to identify the repairs or corrections needed for renewal. While some rules previously set by the insurer have defined one or more categories based on an action to be taken by the insurer, other rules have been set to target a number of specific issues, such as the replacement cost estimate deviating from the policy coverage by more than 5%.
In either case, however, such inspection reporting services provide limited to no cumulative analysis of the inspection data and information. That is, the presence or absence of various issues, a simple binary decision repeated over all of the property characteristics, merely results in a number of flags for each property. The categorization or organization of each property into stacks based on any one of those flags fails to consider the cumulative effect of them all. Such limited analysis therefore leaves a considerable amount of risk assessment analysis to a non-automated, or manual, assessment of the inspection data at the insurer, which may lead to inconsistent or incorrect underwriting referrals or other incorrect insurance coverage determinations. Moreover, as insurers consider a greater number of characteristics in these determinations, the assessment of the cumulative effect of multiple flags, i.e., issues uncovered by the inspection, will be increasingly driven by subjective judgment calls prone to error and inconsistencies.
One method for overcoming the shortcomings of manual inspection data assessment is described in U.S. patent application Ser. No. 11/287,649 entitled “Property Insurance Risk Assessment Processing System and Method” and hereby incorporated by reference herein. As described in the application, a method facilitates an insurance coverage determination for a property based on a plurality of characteristic elements relevant to the insurance coverage determination. The method includes (i) receiving property data indicative of attributes of the property for the plurality of characteristic elements, (ii) determining a property risk score for the property based on the property data, and (iii) supporting the insurance coverage determination with the property risk score.
As described above, the property inspection is an often time-consuming physical examination of the subject property. While third parties may be employed to conduct the physical inspection, and a physical inspection may provide a detailed analysis of the property to assist in the underwriting decision process, the time and cost of the physical inspection are typically necessary regardless of the final decision. In other words, the physical inspection may be a significant sunk cost that is often completed for every application before a final decision can be reached to move forward with the underwriting process.
In addition to property characteristics gathered by inspection, and as also previously described in U.S. patent application Ser. No. 11/287,649, the applicant's personal credit score was used as the measurement of risk contributed by the applicant. However, privacy concerns, frequent inaccuracies in the credit reporting process, and the difficulty in correcting those inaccuracies often make an applicant's credit score an illegal, unfair, or imprecise measurement of the applicant's true contribution of risk to the policy for the insurer.