Why most of your commercial clients are underinsured by at least 30%

Accurate valuation and occupancy data points remain top challenges for commercial broker submissions, according to Greg McCutcheon, president of Canada’s largest property data provider, Opta Information Intelligence. 

In this inflationary environment, keeping up with valuations and ensuring commercial property brokers have the proper data to fill out a valuation tool is critical, he told Canadian Underwriter. 

“Unlike residential, where we have guaranteed replacement cost, for commercial, you have actual cash values,” McCutcheon said. “ACV payments allow the building owner to have more decision-making on how much they want to insure the building for. 

“The challenge for us is that we see 70%-plus of commercial buildings remain underinsured by at least 30% on average,” McCutcheon said in an interview with Canadian Underwriter Monday. “We work with both building owners and brokers, and also insurers, to focus on this on a regular basis.” 

Occupancy data is another challenge. “Occupancy is one that changes readily,” McCutcheon said. “Even though we tap into multiple sources to keep our occupancy information up to date, it’s a moving target because businesses do come and go. 

“Not only have we gone through a pandemic, which was very difficult for small business owners, but it’s become more and more challenging for small business owners to succeed in this environment,” he said. “Occupancy is a big gap…” 

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So, for commercial underwriters, there can be lag time between data updates. “It’s difficult for a commercial broker to easily obtain all the information that they would want to be able to put through a good commercial submission,” McCutcheon said.  

With no central database, brokers sometimes need to research information on the internet to find out as much detail as they can about a business. But this process is time-consuming and can take two or three hours, McCutcheon said. 

Opta recently launched a Canadian product called LightSpeed Commercial. It uses advanced artificial intelligence to replicate what the broker is doing, but in seconds, McCutcheon reported.  

“It goes out across the Internet of Things, it reads all the information on the business’ website, as well as all the social media references to the business, as goes as deep into things like patron reviews, and uses AI to recognize photos of the business to determine and help assess exactly what type of business it is.” 

For example, a broker may discover through research that a restaurant/bar has live entertainment on site during the weekends — changing the risk profile. But LightSpeed can use advanced AI in sub-seconds to quickly ascertain and classify the business, McCutcheon said. 

“If you don’t get it right, or you don’t classify the business correctly, let alone having spent so time to get the submission correct, it’s a problem,” McCutcheon said. “In the U.S., there’s more public record data available, and that does not exist in Canada.” 

But advancements are being made regarding aerial, streetscape and satellite imagery, he said. For example, brokers can use tools to measure the footprint of a building or analyze imagery through AI to know there’s a tar asphalt roof that needs to be repaired. 

Looking forward, McCutcheon expects the hard market in commercial lines to continue, along with inflationary, interest rate and reinsurance pressures. “I think it’s going to be a continued pressure to get the premium increases that are necessary for the industry.” 

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