Cat Calculator

Quite often when the industry talks about tech issues, it discusses the need to explore technologies that will bring together various segments of the insurance community to provide better, more streamlined service to consumers. But one thing the insurance industry sorely needs is a new, basic technology that will better quantify the industry’s overall value to consumers.

We need a ‘cat calculator.’

As envisioned, a cat calculator would provide real-time statistics from insurers across the industry, showing how many claims have been opened as a result of either a man-made catastrophe or a natural catastrophe event such as a fire, flood or earthquake. It would give the public an immediate, real-time, aggregate total of how much these claims are worth.

As far as we know, this kind of technology has not been invented yet. If it existed, it would aid the industry immensely in putting a credible, tangible dollar figure to the kind of contribution insurers make to society during times of great stress and hardship.

Frankly, as it stands now, no one has any idea about the scope of the work insurers do until well after people have forgotten that a catastrophe has occurred. Without any kind of quantifiable figures early in the process, when the disaster is top of mind for the public, it is quite clearly impossible for the industry to demonstrate its true value to the community in a clear and tangible way.

The proposed ‘cat calculator’ would be a means to this end.

A demonstration of how such a calculator might work can be found on Health Canada’s Web site. Early during the days of the spread of the H1N1 influenza, the public had immediate and online access to current H1N1 flu statistics compiled and disclosed online by Health Canada.

Take, for example, the chart that can be found at:

http://www.phac-aspc.gc.ca/alertalerte/h1n1/surveillance-eng.php. The Health Canada stats in this chart are not complicated at all. The chart simply lists the provinces and territories, gives a territorial breakdown of the number of deaths related to H1N1 during the most current week and displays the cumulative death totals for each province since the beginning of the outbreak.

The beauty of the table is that basic information about H1N1 was available to the public early. It was easily accessible on the Web site, and it provided the public an instant snapshot of the scope of the deaths related to H1N1.

In short, it provided context. Presumably, the table was updated and kept current through consultation with the various hospitals in each of the regions. No doubt the numbers weren’t perfect. (How, for example, do you keep track of non-hospitalized patients who succumbed to the disease? How do you determine whether the death was a result of H1N1 when other symptoms may have been present?)

The point here is this: any methodological concerns about how the data was collected quite rightly did not deter Health Canada from reporting what information it had in a timely and simple manner.

Now, transfer this idea over to the insurance industry’s reporting of damage claims during catastrophic events.

Imagine insurers from across the country submitting basic, aggregate, electronic, peril-driven claims information to a central database. The data would not have to be elaborate. Figures might be based on the number of Notice of Losses received by insurers and a dollar amount for the claims. (Insurers can debate all they want how the data is to be defined, so long as it’s simple for the public to understand.)

The proposed cat calculator would compile and collate the claims totals from insurers and spit out aggregate data in a format quickly and easily digested by the public (the Insurance Bureau of Canada’s Web site would seem the logical spot for this information to reside).

Et voila, within a day of the major rainstorm, hailstorm, propane explosion, burning of the creamery factory, etc., the public can see insurance companies generally have opened ‘x’ number of claims worth ‘y’ millions of dollars.

With these real-time cat calculations, the public — and their political representatives — will know clearly and immediately how much these major claims cost the industry as a whole.

Most importantly, these numbers would provide a very tangible way for the public to see for themselves how the insurance industry contributes a great deal to the public’s recovery efforts in the event of a catastrophic disaster.