"Only connect!” wrote the English novelist, E. M. Forster. “Live in fragments no longer.” This famous injunction could serve as an information-management strategy for the modern-day reinsurance industry and any other industry in which location-based factors play a role.
Postcodes make it possible to carry out highly detailed analyses as well as track and compare values across multiple regions and markets. Put simply, postcodes help transform information into actual insights.
Finding connections amidst fragments
Faced with a deluge of data ranging from loss sums, premiums and asset values to weather statistics, natural catastrophe trends and countless other risk-related variables, the reinsurance industry currently struggles to pinpoint the most crucial insights amidst these endless details.
A geographic approach to data management brings dramatic clarity to this disparate information. This is because linking and visualizing information on maps - using the geographic component that most data contains - quickly reveals both how these variables interrelate and how they distribute across a given market area. This so-called “geomarketing” approach allows reinsurers to see, at a glance, how their portfolios and risk profiles stack up from region to region.
Tapping the potential of postal boundaries
Address-based data is like a vast collection of individual trees. The actual forest formed by these trees can only be recognized via some higher organizational structure. That’s precisely the role played by postcodes. These postal boundaries make it possible to preserve individual point data while simultaneously linking them to a structure and analyzing all associated information. This approach reveals regional trends and data relationships that would otherwise be difficult or impossible to spot.
Postal boundaries are not the only regional level that can be used as a basis of analysis. Other possibilities include administrative levels such as municipalities, districts, states and statistical regions. But postal boundaries offer distinct advantages over these other options. One reason is that virtually every country in the world has a postal system, which gives users a worldwide geographic basis of planning that supports comparisons and analyses across national borders.
Also, there tends to be a certain logic to postal demarcations that corresponds to the structure of the street network and natural boundaries such as rivers, lakes and mountains.
Finally, postal boundaries are typically more granular in densely populated areas. This is ideal for risk management, because insured assets are often highly concentrated in more urban areas.
Correctly digitized postal boundaries also provide comprehensive coverage, without any gaps or overlaps. In other words, every inch of a given market is assigned to a specific postcode. And each of these postcodes is an enclosed polygon that can be used to store, compare and analyze a wide variety of information.
Going beyond mere illustrations
A geomarketing approach to risk management goes far beyond simply displaying values on maps.
After importing postcode-based data into a GIS or mapping software, this information becomes associated with the corresponding postal polygon. Each polygon functions as a data repository that can be used to store, analyze and cross-reference a limitless variety and quantity of information.
Relevant market data can also be incorporated, such as values on purchasing power, number of inhabitants and household types. New insights can be extracted by cross-referencing two or more variables. In this way, the postal polygon serves as a primary building block for constructing data models to pinpoint trends and predict future developments. Using postal structures as a primary planning level thus makes it possible to maintain control over the immense volumes of data streams associated with risk management.
Capitalizing on the Russian doll principle
Another advantageous feature of postal boundaries is their nested structure. In other words, more detailed postcode levels - such as five-digit postcodes - fit perfectly inside less detailed postcode levels, akin to the way traditional Russian wooden dolls fit inside one another.
This structure offers tremendous benefits when it comes to planning and managing risk. For example, data on insured values or points of impact can be compiled and displayed at the five-digit postcode level for micro-planning and analysis. Or a less detailed level can be chosen to illustrate how these values are distributed over a broader market area. Users can easily drill down or scale up to the desired level of detail depending on the application. In short, this ability to move between different granularities provides enormous flexibility for displaying and analyzing risk-related information.
Connecting information for penetrating insights
Geodata that fulfills these requirements makes it possible to yoke together the vast quantities of information with which the reinsurance industry must contend. The previously hidden trends and relationships between premiums, loss sums, past claims, insured values, damage probabilities and countless other variables become visible when this information is linked and displayed geographically. Postcodes comprise the basis of these analyses in the reinsurance industry and indeed in any case involving large quantities of data with this shared geographic component. +++