NEW YORK, June 20, 1997 — State Farm Fire and Casualty Co., the largest insurer of homes in the United States, has signed a three-year contract with Insurance Services Office, Inc. (ISO) to use ISO's state-of-the-art Geographic Underwriting System (GUS) to assist with pricing residential and commercial property policies across the country.
Specifically, State Farm will use a customized version of ISO's new geographic information systems (GIS) technology to accurately determine the Public Protection Classification that applies to individual properties that State Farm insures. State Farm will use GUS as it reviews 21 million policy records, as well as for all future property-policy renewals and new business.
ISO determines Public Protection Classifications, based on its assessment of the fire-suppression capabilities of about 30,000 communities, a property's distance from a fire station, and the availability of water at the site. The classifications, which apply in all states, are a major rating factor that State Farm and other insurers use in determining premiums for individual properties.
"The accuracy that GUS provides simply could not be achieved before," said Don Sullivan, State Farm Fire and Casualty's executive vice president and chief administrative officer. "We'll be the first countrywide insurer to fully integrate the technology into our policy-processing systems, which is the best known way to ensure accuracy for our current and future policyholders."
State Farm's three-year contract covers ISO's provision of consulting services, software and technical support, as well as data.
ISO is working with State Farm to customize a solution to the problem of marrying an address with its correct Public Protection Classification. State Farm will check classifications for all business through an electronic data interface with ISO. State Farm will assign classifications to new business in real time, using a proprietary Intranet that permits GUS to be fully integrated into State Farm's underwriting and policy-issuance processes.
State Farm will be reviewing its policies during the next 18 months.
"State Farm recognizes the benefits of GUS," noted Michael Fusco, ISO's executive vice president and chief operating officer. "The company tested our technology in multiple states and found that in each case, GUS technology significantly improved accuracy levels. By correctly classifying properties, insurers can ensure their premiums accurately reflect the risk they assume. We look at State Farm's selection of GUS for broad application as validation of our technology and our significant investment in it."
Fusco noted that the assignment of the correct Public Protection Classification to a specific property at each policy renewal is complicated and difficult for a number of reasons:
"GUS technology takes all those considerations into account, and provides the correct Public Protection Classification for a given address virtually instantaneously," Fusco said. "That vastly reduces the need for human intervention — and the possibility of human error."