LexisNexis Homeowners Solutions Home Inspection Index

March 28th 2013

• Industry Overview • Weather

• Shopping

• Home Inspection Index • Current Challenges for Inspections

• LexisNexis Solution

• Summary

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Overview

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Industry Overview

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Industry Challenges

• 2012 U.S. Industry Losses - $57.9 billion • Far above the 2000–2011 average loss of $27 Billion

• Wind & Hail both continue to add a disproportionate component of the CAT and Non-CAT losses

• 2011 Combined Ratio (122%) worst since 2001

• Modernizing Rate Structures • Carriers to continue to evolve their by-peril modeling

• Rating sophistication and segmentation continue to challenge carriers

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Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#

There were 29,996 severe

weather reports in 2011;

including 1,894 tornadoes; 9,417

“Large Hail” reports and

18,685 high wind events

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Wind/Hail: Weather Reports In The US – 2011

Wind Damage Large Hail Tornadoes

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Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#

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Wind/Hail: Weather Reports In The US – 2012

Wind Damage Large Hail Tornadoes

There were 22,503 severe weather reports in 2012; including 1,119

tornadoes; 7,033 “Large Hail”

reports and 14,351 high wind events

Shopping Activity

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Actual Shopping Volume Actual

Inquiry Volume up 200% since in Aug’08!

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US Shop Index

Forecasted Shopping Volume

Quote Volume Forecasted to Grow Through 2015!

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US Shop Index Forecast

Inspection Overview

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• US Homeowners Annual Inspection Spending ~ $200M(1)

– Many large carriers allocate 1-3% of annual underwriting expense budget to field inspections (% usually higher for mid-smaller companies)

• Industry Actionable Rate ~ 10-30%(1) (e.g. 70-90% of inspection decisions do not offer new/actionable insights)

– Important to improve actionable rate given carriers’ limited inspection budget

• Large number of carriers using random risk selection, simple home-grown guidelines or business rules engines to order field inspections e.g.:

– Amount of Insurance – Year Built – Historical Loss Experience – Other home-grown guidelines

Current State of Homeowners (HO) Inspection Programs

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Source: (1)Claims Journal, Oct 17, 2011 Note: Actionable Rate is defined as the percentage of inspections that would actually result in finding a state of undervaluation and/or one or more type of condition hazards

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Actionable Rates You inspected both. Which one should you have inspected?

Were your inspection dollars spent wisely?

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Property A • Year Built: 2000 • Roof Type: Hipped Roof • Square Footage: 3,335 sq. ft • Zip Code: 33176

Property B • Year Built: 2000 • Roof Type: Hipped Roof • Square Footage: 3,275 sq. ft • Zip Code: 33176

Home Inspection

Index Overview

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The Solution: LexisNexis Home Inspection Index (HII)

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• Reduce Inspection Expenses: HII can serve as a filter for many of those properties where inspections are not necessarily required.

• Enhance Profitability: Gain risk selection and remediation insight both at point of sale and across an existing book of business.

• Improve Customer Experience: Non-invasive solution (relative to sending an inspector on-site) that provides fast, actionable information and speeds up the underwriting process.

LexisNexis Home Inspection Index is a new non-FCRA (“Tips & Leads”) solution that identifies properties most likely to have an actionable inspection discovery, enabling targeted inspection expenses. LN HII can be delivered real-time/interactive (system to system) or in batch (via a Rule Plan).

Reduce Inspection Expenses

Enhance Profitability

Improve Customer

Experience

HII Is Derived From A Robust Predictive Modeling Approach Leveraging LexisNexis’ Unique Loss and Public Records Databases

Inquiry Data •Name •Address • Coverage A

HII Predictive Modeling Analysis

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Carrier Data LexisNexis Data

[ 99 = non scorable due to insufficient information]

Low Risk

High Risk

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HII Output

Property Characteristics

Public Records

Loss Data

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Optional inquiry fields include: • Year built • Sq. footage • Pool and/or trampoline

indicator

HII can be deployed at Point of Quote, Point of Underwriting or Point of Renewal

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Point of Marketing

Point of Contact

Point of Quote

Point of Underwriting

Point of Renewal

Point of Compliance

Point of Claim

• Flag riskiest properties and help determine the type of inspection needed

• Carrier rank orders results by Inspection Index and determines profitable cut-off against inspection costs

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• Segment property risk and attract most profitable risks

• Adjust price tiers for the best risk segments.

Inquiry • Policy Holder First & Last Name • Risk Address (Street, State, City & Zip) • Coverage A

Interactive Workflow

Batch Workflow

HII Data call to LexisNexis Home Inspection Index (HII)

• HII helps carriers target properties most likely to have condition or liability hazards, allowing them to prioritize and target their inspection budget.

• HII leverages LN’s unique databases including the largest loss history database available in the industry and our 46+ billion public records.

• HII provides carriers with valuable risk selection information which can be combined with the company’s own custom underwriting rules used to evaluate new business.

• HII is easily integrated into a carrier’s workflow, be it at point of quote, point of bind, or point of renewal.

• HII improves customer and agent experience by offering a point of underwriting index which will reduce time and expense ordering inspections on lower risk properties.

LexisNexis Home Inspection Index Unique Benefits

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• Most carriers use simple homegrown underwriting guidelines to decide when to order inspections on new business and renewals.

• However, with the strategic focus on expense mgmt and improved profitability, many forward looking carriers are working/starting to work on optimizing their inspection programs.

• LexisNexis Home Inspection Index leverages LN’s unique databases including the largest loss history database available in the industry and our 46 billion+ public records.

• LexisNexis Home Inspection Index leads to more actionable inspections resulting in:

– Reduced Inspection Costs

– Right Premium

– Loss Mitigation: amending or cancelling the right policies

– Improved Customer – Agent Experience

Conclusions

Increased Bottom Line

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