Building Permits for Property and Casualty Insurance
How it works
A building permit database can be valuable to insurance companies for underwriting, claims handling, and marketing. However, underwriters, in particular, can reap the rewards. They say, “An ounce of prevention is worth a pound of cure,” and building permit data is a valuable prevention tool for underwriters.
In addition to providing information about the work done on a building, building permit data allows for critical insight into potential hazards that may affect the risk profile of the property. Using this information, underwriters can make better decisions, reduce their risk exposure, and minimize losses.
Increased efficiency and decision making
Access to accurate and current information when evaluating a property is crucial for making informed decisions in the underwriting process, regardless of the property’s location, age, or size.
Underwriters can use building permit data to supplement and verify inspection reports, appraisals, owner disclosures, and other documents. The additional verification helps to avoid unnecessary site visits or additional follow-ups, improving efficiency and reducing the time and cost of the underwriting process.
Building permit data can also automate and streamline straight-through processing (STP) for many policies. According to McKinsey, STP can eliminate the need for underwriter involvement in up to 95% of policies, reducing manual errors, delays, and costs associated with underwriting.
Greater visibility into property replacement value
A key underwriting element includes assessing replacement value. Building permit data can reveal whether a property has been well-maintained, which may increase its value or reduce damage vulnerability.
For instance, if a property owner has taken steps to maintain and improve their property, such as obtaining building permits for renovations or upgrades, this may increase the property’s value, even if it is of the same age as a comparable property that hasn’t been as well-maintained.
Enhanced compliance
Properties that don’t comply with building codes and regulations can pose safety risks and may be more vulnerable to damage, resulting in costly claims. By using building permit data to verify compliance, insurers can help reduce potential liability issues for both themselves and property owners.
Verifying compliance with local building codes and regulations can give insurance underwriters an enhanced view of possible risks, leading to more accurate underwriting decisions and, ultimately, a more profitable portfolio.
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