It goes without saying that property insurance companies — they are businesses after all — want to improve their profit margins as much as they can. In general, a property insurance company’s business model involves the customer paying premiums that are determined in part by taking into account a number of facts about the property. But if a client submits inaccurate or poor data about his property, or if the company does not ask for enough information on the home, the property insurance company can lose money, because they may be setting the premium costs too low.
On the flip side, having the right types and enough data about each and every property they plan to insure can help a property insurance company to make money and improve their bottom line. As for what types of data insurance companies should collect before determining the premium amounts, check out the following examples.
Lot Descriptors: Accurate and Useful
In a real estate deed, a legal description of the property is required. The lot description includes a written description of the property and data that helps to show it on a map. The lot descriptor should be thorough enough that a professional surveyor can find the piece of land based on the precise data. If the lot descriptor is not accurate, there can be issues with property boundaries or improvements being made in incorrect areas. Property insurance companies should have accurate lot descriptors for all of their clients — this way, if there is some type of damage to the property, they can be sure they are covering what is truly and legally belonging to their client. For instance, if there is a fire and some outbuildings burn down, the lot descriptor can accurately assess if all of the structures are part of the insured property, and if the insurance company should cover the damage.
Building Characteristics: Never Insure Blind
Another type of data that is crucial for property insurance companies to obtain is an accurate list of building characteristics. The more reliable and precise this info is, the better the insurer can set the premium amounts. Property insurers should inquire about the materials that were used to construct the home, if there are any hazards on the property, if it has proper sprinkler systems, how far it is to the nearest fire hydrant and more. In general, insurance companies should focus on the acronym COPE, which stands for the type of Construction, Occupancy, including any flammable liquids and chemicals stored on the property, Public and Private fire protection and Exposure, which takes into account risks at adjacent properties. To illustrate the importance of having the COPE data in hand prior to insuring a client, consider what would happen if you didn’t realize that a homeowner stored a great deal of gasoline in the garage to run various types of equipment. In the case of a house fire, the gas could cause the entire property to go up like an inferno. Knowing about this fire hazard ahead of time will help establish accurate premiums.
Property Valuation Data: Just What is in That Home?
As its name implies, property valuation data refers to what the home, the property and its contents are worth. Home values are valued in different ways for various purposes; for example, in the case of property insurance, the replacement value is key. A representative from the insurance company typically assesses this amount, which helps determine what it would cost to replace the home and everything in it, in case it is destroyed. If an insurance company did not realize that their client had valuable antiques in her home and then the house burned, they may be surprised by claims to replace the monetary value of these priceless items. The more a property company knows about the true value of the property, including the contents, the more accurate the premium amounts.
Liquid Assets: Not Just for the Wealthy
While many people associate the term “liquid assets” with well off people with large stock portfolios, this term really refers to anything of value that your client owns. Liquid assets are things that can be quickly converted to cash — checking and savings accounts are good examples. Clients should be encouraged to have good documentation of all of their liquid assets and that all pertinent data be stored in a safe location in the home; if there is a flood or fire, the homeowner will want to be able to quickly retrieve their personal info and take it with them.
DataTree is Ready and Willing to Help
Fortunately, obtaining a great deal of this important data is easier than ever with DataTree. We offer an ever-growing database of real estate data that property insurance companies can access to ensure they are quoting accurate premiums for their clients; this includes map and parcel boundaries, property valuation data and more. Start your free trial today.