Case studies

Background

Around five million people live in parts of England and Wales that are susceptible to flooding, according to the Environment Agency.

Even where their individual properties are not at risk, many householders and business owners in these areas pay higher insurance premiums or have difficulty obtaining cover at all.

This is because insurers have traditionally set premiums in areas of potential flood risk on the basis of postcode bands rather than particular addresses.

Now, the UK's largest insurer, Norwich Union, is harnessing the power of geographical information to improve the accuracy and fairness of flooding insurance.

It has commissioned a national digital flood map designed to pinpoint the risk to individual properties based on height data, digital terrain modelling and flood trends analysis.

The challenge

To ensure that the height and terrain data delivers maximum benefit, Norwich Union needed to replace the reliance on postcode banding with more detailed address geography for both residential and commercial properties.

By focusing down to individual address level, the company wanted to establish which properties within any given postcode area are on raised ground and away from the threat of flood water.

The more accurate risk assessment of specific properties would help those postcode areas disadvantaged in general due to flooding. Many people who previously thought their properties were uninsurable would be able to obtain cover.

Laurence Loughnane, head of underwriting at Norwich Union, said: "Although insurance companies can't stop properties being flooded, we believe we have a responsibility to ensure flood risk is calculated as accurately as possible. Norwich Union has been leading the flooding education and lobbying programme over the past few years and has always been striving for better information about the risk to homes and businesses, and this project represents our further commitment."

To develop its project, Norwich Union needed to include precise, current address data linked to location.

The solution

Norwich Union turned to Ordnance Survey whose unrivalled expertise in collecting and maintaining geographical data to a consistent, national standard has produced one of the world's biggest and most sophisticated geospatial databases.

Part of the database involves Ordnance Survey's address data which uniquely pinpoints or 'geocodes' more than 26 million addresses recorded in the Royal Mail Postcode Address File (PAF).

This instant link between address and location specifically enables highly targeted insurance activities beyond the postcode level such as assessing risk, setting premiums and settling claims. As well as flooding, the link can apply to other peril models.

Ordnance Survey's address data can also support data exchange and association, giving insurance companies potential competitive advantage based on more relevant information and improved decision making.

The benefits

• The use of individual address rather than postcode data means Norwich Union can make sure the flood risk affecting billions of pounds' worth of property is calculated more accurately.
• Policies can be priced more competitively, attracting new customers and growing market share.
• Information will be used to amend existing customers' premiums at renewal.
• Many people who previously could not obtain flood insurance or faced the prospect of higher premiums can now be covered.
• Householders and business owners will be better informed about the risk of flooding.
• The higher standard of accuracy in risk assessment will help prepare for the likely increase in flooding predicted for the future by the Environment Agency and other bodies.
• More accurate data will also help Norwich Union to satisfy the compliancy requirements of the Financial Services Authority in terms of capital adequacy and reserving.