Precision Matters: How Accurate Living Area Measurements Improved a Regional Insurance Carrier’s Profitability
By addressing a fundamental flaw in their data—incorrect living area data—the carrier not only enhanced their profitability but also strengthened the security they provide to their policyholders.
In the realm of homeowners insurance, every square foot counts. The living area of a home isn’t just a number—it’s a critical metric that shapes Coverage A, determines pricing, and is used across underwriting workflows.
When this key piece of information is inaccurate, insurers misjudge the true exposure and risk, leading to mispriced policies and underinsured homes.
This inefficiency doesn’t just affect a single term; it compounds with each renewal and potentially leaves policyholders vulnerable if a claim occurs—just when they need coverage the most.
A regional carrier in the U.S. was facing mounting profitability challenges, a situation not uncommon in the industry. Committed to fixing this issue, they initiated a strategic project focused on renewal reunderwriting.
During this process, they discovered CAPE Analytics’ innovative living area feature. Intrigued by its potential to refine their data accuracy, they ran a proof of concept test.
The findings were startling. The carrier uncovered hundreds of outliers—policies where the living area had a significant error—within a sample test set. These policies that were meaningfully mispriced and were at risk of underinsurance. The magnitude of the discrepancies highlighted the potential to make a significant dent in their profitability challenges.
Recognizing the urgent need for correction, the carrier acted swiftly to right-size their book. Remarkably, they achieved this without any upfront IT investment.
Within weeks of receiving the data for their full book of business from CAPE, they operationalized a new process for reunderwriting thousands of identified policies.
In the meantime, CAPE didn’t just supply data; CAPE partnered with the carrier by providing tools and training materials, ensuring underwriters were equipped to understand and implement the novel living area model effectively.
The results were transformative:
Immediate Policy Corrections: In the first few months alone, the carrier corrected 16% of their policies, aligning them more accurately with the true risk and exposure.
Significant TIV Increase: They are projecting a 1.4% lift in Total Insured Value (TIV) across their entire book—a substantial gain that enhances both the carrier’s financial health and the policyholders’ protection.
Exceptional ROI: The carrier is witnessing over a 10X return on investment in the first year, with additional ROI expected as premium gains continue in future years—all while insureds are more adequately covered.
Accurate data and decisive action can have a profound and immediate impact. By addressing a fundamental flaw in their data—incorrect living area data—the carrier not only enhanced their profitability but also strengthened the security they provide to their policyholders. It’s a compelling testament to how innovation and strategic partnerships can drive meaningful change in the insurance industry.
To learn more about quickly implementing CAPE’s innovative living area data for immediate ROI, visit this page or contact us today.