Financial Services

Mapping for risk management

ICICI Lombard’s use of a GIS solution for risk management was the first project of its kind in the Indian insurance industry. by Venkatesh Ganesh

Anuj Gulati Head, Operations & Technology ICICI Lombard

Risk management is defined as the process of planning, organising, leading and controlling the activities of an organisation in order to minimise the effects of risk on the said organisation’s capital and earnings. Enterprise risk management expands this process to include not just the risks associated with accidental losses, but also financial, strategic, operational, and other risks as well.

ICICI Lombard used a Risk Management System (RMS) that helped it zoom into spatial level risk data representing real-world entities including both geo-referenced and quantitative attributes attached to it at a national scale. It also used GIS solutions to use tools, maps, and latest census demographic data.

This helped the company get a clearer picture of the levels of risks associated not just with financial information, but also with natural risk-prone geographies. It allowed the company to understand its customers better and make strategies according to the more accurate levels of perception offered by the solution.

A Unique Deployment

Anuj Gulati, Head Operations and Technology, ICICI Lombard, says, “The use of a GIS-based RMS was essentially to identify areas on a map with high population density, a large concentration of rental properties, or other demographic characteristics that affect whether to underwrite a property for fire or burglary insurance.”

Further he reckons that it can determine if a home is in a flood plain, near a fault area, or is susceptible to wild fires and other hazards to make informed decisions on whether to underwrite a property for hazard insurance or find the driving distance to the nearest fire station or police station.

Explains Gulati, “For an insurance organisation like us it makes sense to have such systems as it helps in determining the correct details of a property.”

Prashanti Shringarpure Project Leader, GIS Application ICICI Lombard	Nirupam Das Project Manager Business Intelligence

It is interesting to note that the project began in February 2004 and was completed in seven months (September 2004) flat. The Web part of the project took about ten months (began in November 2004 and ended in September 2005). All together it cost Rs 35 lakh.

Correct Systems

The organisation used an application called MapXtreme to supplement its RMS. Gulati says, “MapXtreme (RMS-Web Map Server) provides support to Microsoft’s ASP, including sample applications to let us build applications faster and easier. It has an XML dataset for accessing XML data sources and ships with XML and Oracle OCI sample applications.”

MapXtreme’s open architecture works with any Web server and takes advantages of ISAPI or CGI gateways. In addition, it has no proprietary plug-ins, so it delivers maps to any Web browser on a PC or UNIX workstation. It provides a comprehensive list of powerful mapping functions to meet various mapping needs.

The RMS application resides on Windows 2000 OS. The system interacts with MS IIS server, MapXtreme 2004, Oracle 8i, MapInfo 7.0 and GIS OLAP reporting tools. There is also a GIS OLAP reporting tool, which is a report builder to facilitate the users to generate fixed or dynamic reports as per requirements.

Objectives Accomplished

In managing insurance policies, getting the correct details is of prime importance. Gulati believes that if the system for analysing the information related to policy and customer concentration service is available, decisions are much more accurate, efficient and quick.

Another reason for deploying such systems was to incorporate regulatory requirements of Nat-Cat (Natural Catastrophic) limits in reinsurance treaties, provide real-time information of potential damages in case of a natural calamity and provide business intelligence requirement at the geographical level to ensure elimination of bad risk.

Since the implementation of the new systems, the claims processing takes a shorter turnaround time. Says Gulati, “GIS helps claims processors use the customer or claim location address on a map relative to other claims and to boundaries such as flood and storm limits. In case of reinsurance, it helps in better premium count by identifying good and bad risks. Damages are assessed and modelled to help the reinsurer predict the results of future events, thus providing more accurate underwriting.”

A big advantage has been the increase in the number of customers. The GIS software combined with Government of India’s census demographic data packages allows insurers to profile potential and existing customers and perform predictive modelling to find new opportunities.

One Of Its Kind

The RMS helps to zoom into spatial level risk data representing real-world entities including both geo-referenced and quantitative attributes attached to it at a national scale. This application helps to manage risks in a better way, and operate more efficiently by geographically assessing and analysing information about underwriting, risk management, and customer service.

MapInfo, a Geographical Information System (GIS) based desktop application is used for deploying the RMS and help assess and analyse information related to policy and customer concentrations. It includes risk information and analysis of different nature, such as estimated impact of frequency and severity of earthquakes or other natural calamities, which ultimately leads to efficient management of risk and correct pricing of policies.

Though it is too early for the company to talk on ROI, it has predicted that over a period of three years, it would be able to increase the revenues by Rs 47.85 crore.

The systems have already benefitted nearly 50 employees in reinsurance and underwriting. According to Gulati, once the Web-based module is rolled out, it will benefit 800 more employees and around 35,000 customers.

Marching Ahead

ICICI Lombard has an aggressive future road map. Gulati says that it plans to add various BI related features, such as time-series analysis and trend analysis, which will be available to the sales force. The system would also allow rural data mapping, weather insurance, analysing historical weather information depicting natural catastrophes and allow for corporate database mapping.