Reporting secondary loss characteristics may result in reduced premiums: RIMS panel

Risk managers should make a point of including secondary loss characteristics on an insurance portfolio not only to potentially reduce aggregate exposure, but also to reduce premium significantly, delegates of the Risk and Insurance Management Society (RIMS)’s conference were told. Bruce Norris of Edgewood Partners Insurance Center, Marian Ivan of RREEF and Michael Horvath of Simon Property Group offered the seminar CAT Modelling: Science or Art, Risk Management Opportunities or a Trap Door? at the RIMS conference in Boston on Apr. 26.Norris suggested to delegates that including ‘secondary loss characteristics’ in an insurance portfolio might result in major premium reductions. Examples of these characteristics include whether a building has tuck-under parking; whether a building has a bolted foundation; and, if a building is in a wind zone, the age of its roof and how that roof is fastened to the structure.The advice came with a caveat: “There are some givens you should know, but if you don’t have your primary characteristics — address, construction year built or occupancy — then all of the secondaries in the world are useless,” Norris said.Ivan said she included secondary characteristics in a recent renewal, and it reduced the aggregate loss exposure for the Lloyd’s syndicate by $150 million.Horvath said he had a similar experience. When he included 68 additional secondary characteristics at renewal, “not only did it bring down our aggregate loss exposure, but the premium reduction was almost $6 million.”Risk managers can obtain this data by hiring a third-party firm to confirm current primary data and collect secondary data at a cost of approximately $200 per location, the panel said. “It is mind-boggling that not everyone is doing it,” Norris said. “On a $250-million building, just spend the $200.”