Environmental factors such as subsidence, droughts, increased flooding and soil erosion have long been part of risk assessments. However, now more than ever, it is important that available datasets are leveraged to remove any additional layers of uncertainty as situations evolve. At present, more than 5 million homes and businesses in England are at risk of flooding (according to Environment Agency estimates). Therefore, accurate location data to exactly locate a given property is essential. Concerns about the predicted impact of climate change are multiplied given that the UK also has an aging building stock. In fact, a 2017 report from the BRE shows that 20% of housing in England alone was built before 1919. Many properties in the UK are therefore not suited to withstand changing conditions, so it is imperative to know where the buildings are and whether they can handle a changing environment.
The UK government and the wider market have also started to focus on how homeowners can be incentivized to make changes to their homes to better equip them. For example, some companies are looking to charge customers based on their environmental rating or set lower mortgage rates for buyers looking to borrow for an A-rated EPC home.
The pandemic has led to more people working from home, which means more properties are being adapted rather than designed specifically for their intended use. While the residential real estate sector is both booming and changing, the non-residential market has seen a sharp decline with the drop in demand for offices. As a result, commercial buildings are being converted for residential purposes. This adds uncertainty about whether properties and assets can truly withstand the test of climate change in their longer-term location.
Use addressing data to bring clarity in times of uncertainty
There are 45 million addresses in the UK, but not all databases can help lenders accurately describe the wider context of a property or asset. While most people are familiar with the postcodes used to indicate where properties for listing are located, datasets like this are not enough to paint an accurate picture for assessing risk to individual properties and valuable assets. . Postcodes, for example, were designed exclusively for the efficient delivery of mail, while the postman may be able to find a property using a postcode, while these can cover areas as large as 442km.2this cannot be used as an accurate indicator of the environmental risk that a particular property or asset will potentially face.
Overlaying accurate geospatial data with data from a local authority or third-party data provider can help assess factors such as resources, events, risks or behaviors that will influence the duration of life of a good. With a full picture of these items including exact location, unique property reference numbers (which are authoritative
identifiers used to uniquely identify addressable locations in Britain), alternative address names and numbers and the location and volume of access points, lenders can gain unparalleled context at the level of individual properties. Critical decisions can therefore be made for specific buildings as opposed to broader groups of properties and assets. Businesses need this critical insight and better understanding to better assess the type of coverage that should be offered to owners. Additionally, precise addressing data on individual properties can also be used as a fraud analysis tool, to remove an additional layer of uncertainty.
Set up good addressing bases
Accessing information through precise address data does not necessarily mean having the most data available. Lenders should also consider the timeliness of the data, i.e. the date it was captured, and when choosing a data set, assess its frequency to understand when it will be updated. up-to-date and, therefore, how quickly the dataset changes over time. Ordnance Survey’s AddressBase is continually updated with changes and provides an authoritative source of information that users can trust and rely on. Only with a dynamic data set at their fingertips can lenders seek to mitigate rapid environmental changes, such as flooding and subsidence. In our data-driven world, it is vital that these elements of data “hygiene” are in hand, to protect against this uncertainty and also to exploit data to gain speed and profitability.
At Ordnance Survey, we have worked with Aviva and its partners to use address data from AddressBase to better assess risk. The insurance company’s Geographic Information Systems (GIS) team used the addressing data with its desktop IM systems (ESRI ArcGIS) and integrated it with other datasets to process floods and other models of climate change. This helped them recognize trends that would otherwise have been difficult to recognize and as such were able to create rating factors and pricing models that best reflected reality.
Europa Technologies, an OS partner, has also worked with some of the UK’s most successful insurers to perform accurate risk analysis using address data that can reveal the flood risk for an individual address. Similarly, it has also unlocked more competitive premiums for UK customers as well as more accurate and reliable underwriting.
As these examples show, lenders are already getting better insights from better addressing data, but that can only happen if fundamental considerations are taken into account. Unlocking information that can evolve with risk and climate change predictions requires access to dynamic datasets that are maintained and updated regularly. Only the most reliable dataset can help ensure that overlay can also occur with other types of data, so that more complete images can be created, viewed, and accurately assessed. With more levels of uncertainty added to a lender’s outlook, it becomes more important that the fundamentals are in place to avoid the build-up of risk. Data addressing is a tool that can be used to unlock the certainty the industry needs now.
John Kimmance is Managing Director of National Mapping Services, Ordnance Survey