Industry & Insurance Classifications

Industry & Insurance Classification

Accurate industry classification is crucial for commercial insurance underwriters during the Quote-To-Bind and Portfolio/Book Management Review for Renewals. It enables precise risk assessment, fair pricing, tailored coverage, regulatory compliance, and effective loss prevention, ensuring businesses receive optimal insurance protection.

Challenges of Classification

Consider real-world scenarios where industry misclassification risks may come into play. For instance, misclassifying a Tech Software company as a Consulting Firm can lead to insufficient risk assessment and coverage for technology-specific liabilities, potentially impacting long-term business sustainability. Another example is misclassifying a 3D Printing Manufacturer as a standard factory, overlooking the risks and issues associated with advanced manufacturing processes.

Current approach to Classification

The current underwriting process generally involves either a self-declaration provided by the applicant/broker or a manual assessment by the underwriter. However, these approaches can be prone to error, as applicants may not fully disclose all aspects of their business operations, leading to potential misclassification risks going unnoticed.

Some examples of why this might occur include:

A Broad Generalization: Sometimes, businesses may choose a broader industry code encompassing a wider range of activities than they engage in. This can result in inaccurate risk assessment and premium calculation.
Primary vs. Secondary Activities: Businesses may have primary and secondary activities, and it can be difficult to correctly prioritize them when selecting an industry code.
Lack of Familiarity: Individuals responsible for selecting industry codes may not fully understand the classification system or be unaware of more specific codes that better describe their industry niche.
Changes in Business Activities: If a business diversifies or changes its core activities, it may forget to update its code, resulting in coverage discrepancies.

This can potentially lead to underwriting inaccuracies.

AI Industry & Insurance Classification using Veridion

Using Veridion, insurers can streamline the process that automates the identification of industry classifications and misclassifications. The process is designed to meticulously analyze a company's activities as described by its digital footprint and accurately predict the primary and secondary industry & insurance codes. The process is run weekly to capture any changes in the business and reflect this in the industry codes.

Key Features

A. ML models predict NAICS, SIC, ISIC, NCCI, IBC and NACE codes
B. Veridion returns results in under a second and with evidence
C. Veridion coverage business coverage is global and covers SMB to Large Corporations