New CoreLogic Underwriting Tool Addresses Growing Sewer Backup Risk

The new tool applies complex location-based analysis to the risk of sewer back, which results in more than half a million claims annually, with average claims rising 3 percent annually, according to the Insurance Information Institute.

(The Pont du Gard aqueduct in Nîmes, France, an example of a key feature of public sanitation in ancient Rome and its provinces. Photo credit: Emanuele.)

CoreLogic (Irvine, Calif.) has introduced the Sewer Backup Risk Score, a new data-based assessment that identifies the potential risk of sewer back up and basement flooding with location-specific analysis. The proprietary risk score can be integrated into insurance underwriting processes to aid understanding of risk potential based on a set of comprehensive scientific factors, including watershed hydrology, rainfall intensity and frequency, soil hydrology properties, tree coverage, land depression, aging sewer systems at the structures and in the communities, combined sewer areas, land slope, elevation variances between properties and potential flood sources, and sewer system patterns, the vendor reports.

Lindene Patton, CoreLogic Spatial Solutions.

Lindene Patton, CoreLogic Spatial Solutions.

According to the Association of California Water Agencies, incidence of sewer backup claims is estimated at more than 500,000 annually, with average claims rising 3 percent every year according to the Insurance Information Institute. Research from the Insurance Information Institute also shows that sewer backup coverage is relatively inexpensive to purchase, ranging from annual premiums of $40-$160, while the average claim can easily be $25,000 or more. Prior to writing an endorsement for sewer backup or excess flood, insurers need the ability to assess the potential risk for a future claim. They must also be able to decide whether to offer an endorsement and to ensure that the proposed premium is in line with the risk assessment.

“CoreLogic is on the forefront of helping insurers and property owners identify risk associated with flood-related events,” comments Lindene Patton, global head of hazard product development, CoreLogic Spatial Solutions. “The marketplace was in need and requested a better means of assessing this specific type of risk, and Sewer Backup Risk Score fills that void. By accessing the power of CoreLogic natural hazard datasets, we are able to accurately identify potential risk for surface flooding, which is a primary contributor to sewer backup and basement flooding.”

Numeric and Categorical Rating

Sewer Backup Risk Score provides both a numeric (1-100) and categorical risk rating (ranging from Very Low to Extreme) that enables insurance underwriters to set guidelines for writing sewer backup and excess flood endorsements, establish appropriate premiums and evaluate potential portfolio exposure, CoreLogic reports. The extent of potential risk is determined using a number of CoreLogic geospatial datasets, including Flood Risk Score, Flash Flood Risk Score, hydrology information, property data, neighborhood data and land depression layers, as well as other scientific datasets from the U.S. Geological Survey, the U.S. Department of Agriculture and commercial data providers, to evaluate sewer conditions and risk intersections along sewer lines.

“As average sewer backup claims continue to rise, insurance companies have to be able to better evaluate potential risk for this type of endorsement,” Patton adds. “Their underwriting decisions must be good risks for their books of business. With access to these data-driven insights, they are empowered to make smarter decisions and can even pass along advice to their customers on how to mitigate against the risk.”

 

 

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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