Catastrophe insurance is the sexy part of my industry: lots of data and “analytics” and in tune with the information age. It’s also alternated between the most and least profitable line of business in the business.
Here’s what you need to write the stuff:
- A really good map of where buildings are.
- Some knowledge of what those buildings are made of and, just as importantly, what they’re worth.
- An idea of the susceptibility of each region to natural catastrophes.
In my experience, people in the insurance business put a bit too much emphasis on #3, which a cursory understanding of is easy to get but a deep understanding of is currently beyond any intelligence yet discovered. The reality is that all of the science in the underwriting is in #s 1 and 2: where are the buildings and what are they worth?
What if Google just suddenly realizes it can probably do this better than anyone else?
“We already have what we call ‘view codes’ for 6 million businesses and 20 million addresses, where we know exactly what we’re looking at,” McClendon continued. “We’re able to use logo matching and find out where are the Kentucky Fried Chicken signs … We’re able to identify and make a semantic understanding of all the pixels we’ve acquired. That’s fundamental to what we do.”
I like imagining an even more tantalizing project: open source cat underwriting. Open Street Maps does most of what Google does except for free.
Will some actuary use this public data to check an industry-changer into Github one day? Might Index Funds (capitalizing this automated underwriting platform) and governments (subsidizing coastal homeowners) one day split all catastrophe insurance between them?