Impact of Improved Evacuation Plans on Insurance

1. CSCI 8715 GROUP 10 Andrew J. Miller (SID: ) Dept. of MGIS mill2023@umn.edu Urvashi Mishra (SID: 3796632) Dept. of CSE mish0081@umn.edu University of Minnesota Impact of Improved Evacuation Plans on Insurance Dept. of CSE, UofM

2. Overview • Motivation & Challenges • Related Work • Contributions • Problem Statement • Key Concepts • Methodology • Key Questions • Conclusions • Future Work • References Dept. of CSE, UofM

3. Motivation • Increase trend in high rise buildings • Owners of large commercial properties and businesses invest significant amount of money • Disasters can happen anywhere at anytime • BuyInsurance to minimize risk • Invest in preventive measures • evacuation plans, emergency plans, sprinkler systems, fire alarm systems etc. • Do better evacuation plans influence shaping of insurance policy and its cost? Dept. of CSE, UofM

4. 2. Related Work • No previous research addressing the relationship – Evacuation Plans & Insurance • Research In Evacuation Planning • Technical in nature; Directed at improving the plans Dept. of CSE, UofM

5. 3. Contributions • First-of-its-kind: Established the relationship – based on multi-perspectiveviews • Experts from insurance and reinsurance fields • Determine key factors considered while framing an insurance policy. • Give brief insight - formulation of an insurance policy • Identify types of insurances – impacted by better EPs • Quantitatively • Feasibility measure for continuing research • (will owner accommodate these) • Identify the key parameters • to “quantify the value of improved evacuation plans” • Present “methods” useful for quantifying these parameters • dollar value, improvement in EP, and dollar loss. • Identification of financial incentives - insured & insurer • Determine the impact on “Reinsurance” Dept. of CSE, UofM

6. 4. Problem Statement • How do improved evacuation plans influence the “insurance policy” and the “cost” of this policy for the owner or the renters of the property and the insurance provider? • How to quantify the parameters signifying the value of improved evacuation plans in relation to insurance ? • Unclear at present; No consensus on which parameters • Main focus on High Capacity High Rise Facilities with risk from fire. Dept. of CSE, UofM

7. 4.1 Importance • Everyone pays when there is a disaster – • owner of the facility, tenants, or insurance company. • Improved Evacuation Planning can • prevent or reduce the loss of life. • save huge monetarylosses. • reduce chances of a long duration law-suit. • Resources are spent in research • Reduceoverall risk exposure of all the concerned parties. Dept. of CSE, UofM

8. 4.3 Difficulties • Lack of literature • Very little current or past research into this topic. • Insurance companies do not have a standard model that is used to develop rates. • Lack of unanimity - Parameters to calculate the value of an evacuation plan • Formulation of Key questions • Identification & contacting “right” people • Communication • Some of the information - interpreted. Dept. of CSE, UofM

9. 6. Methodology • Technique: Interview based research • Experts - Insurance & reinsurance • “E-interview” or “virtual” interviews Dept. of CSE, UofM

10. 7. Key Questions • Q1: What kinds of risksare associated with large buildings and how are they assessed? How much coverage is provided by an insurance company and what are the factors considered while setting premiums? • Q2: Currently what is the role of (legacy) evacuation plans in deciding the insurance policy? • Q3: How will better evacuation plans influence the insurance policy evaluation? Dept. of CSE, UofM

11. 7. Key Questions • Q4: What will be the influence of better evacuation plans on deductibles, discounts and premiums? • Q5: How will the better evacuation plans (promising relatively less time to completely evacuate a facility) influence casualty exposure and premiums? • Q6: What will be the impact of better evacuation plans on various types of insurance coverage – workers compensation, casualty insurance and liability exposure? Dept. of CSE, UofM

12. 7. Questions • Q7: Will better evacuation plans result in better insurance policy for the employer or the owner who in turn will be motivated to incorporate them despite additional costs? • Q8: Will it influence reinsurance? • Q9: How does one quantify the value of improved evacuation plans for the employer or the property owner and the insurance company? Dept. of CSE, UofM

13. 7.1 Knowledge Sharing • Better EPs - most likely accommodated in the facility – Positive Risk Mitigation Effort. • Possible - get some good discounts - technical devices and other advanced mechanisms installed. • Effectiveness of an EP is important – influence premium • Weightage of EP – depends on insurer and may vary from one Insurance company to another • Successful demonstration of the superiority of the improved EPs to the insurer - negotiate lower premium. • Communicate clearly - insurance provider (negotiations) • It is the responsibility of the property owner to ensure that the proposed premium reflects a superior evacuation plans in place. Dept. of CSE, UofM

14. 7.1 Knowledge Sharing Superior EPs … • may result in premiums go low & deductibles go high • will reduce the costs of workerscompensation and casualty insurance packages & the liability exposure of the employer (very little, less than 2%). • will result in lowering of insurance premiums(less than 2%). • At reinsurance level the impact is assumed to be very low (less than 2%) • Only if the insurance companies and their brokers understand and communicate to each other the differences in their portfolios effectively can this be realized. • 3Parameters – quantify value of improved EP – dollar value, quantified improvement, dollar loss. • “Depends on the insurer and their capacity of absorbing risk.” • Win-Win Situation for both policy holder and the provider Dept. of CSE, UofM

15. 7.2 Surprises? • 1: Role of legacy EP (s) • Surprise 1: unclear to most of the experts • Experts - different areas with in the domain – underwriting, insurance agencies, catastrophe model developers, property risk modeling, reinsurance • Surprise : 2 • One expert quantified as 20/100 1) 20 % is a very high weightage 2) Argues “even with no evacuation plan in place an insurer may provide insurance to the insured” Conclusion: Very little weightage is given to EP. Dept. of CSE, UofM

16. 7.2 Surprises? • 1: Role of legacy EP (s) • Surprise 3: Another expert • The amount of weight given to evacuation plans during the policy formulation “depends on the insurer” • We believed that evacuation plans should have some quantifiable value fact : some insurance companies offer discounts • Consensus - over the “effectiveness of an evacuation plan” - considered during property appraisal “positive risk management aspect” – affect premiums Dept. of CSE, UofM

17. 7.2 Surprises? • 2: Better EPs => significant reduction in casualties • Reduce Casualty exposure of the owner/employer. • Surprise 4: One expert had a contradictory view ; claimed: “exposure will not be reduced” • Argued: “the loss potential will be same in both the cases (with and without better evacuation plans) and immediate destruction of the facility would generate very similar losses irrespective of the evacuation plan” • Object: “the losses will not be similar if the facility is occupied by a large work force” • Our argument: The event has to be massive enough to destroy the property and may require complete evacuation of the building • Better EP => fully evacuate the building with less or no casualties => Lower Casualty Exposure!! Dept. of CSE, UofM

18. 8. Conclusions • Successfully attempted to determine the significance of better evacuation plans w.r.t. insurance. • Provided a widerrange of perspectives on this issue • Answered all the questions essential for determining the value of better insurance plans - their impact on various kinds of insurance and benefits it might hold for the owner or renter of the property and the insurance provider • Provided some insight to how the better plans may affect the reinsurance • Identified 3 parameters - used by the insured for quantifying the value of improved EPs; conveying it emphatically to the insurance provider to harness all the benefits • Provided the feasibility measure & fundamental basis for all the on-going and future research Dept. of CSE, UofM

19. 9. Future Work • Current research – small scale • large scale using two different methodologies • a field study - covering a larger set of related people including appraisers, structural engineers, architects .. • understanding their viewpoints • property owner’s and renter’s perspective over this issue • “what is that which will drive them - accommodate better EP” • web-based data collection in order to get a large set of data from larger group of experts • research in a more general framework (our study to the case of a fire hazard) : hurricane, earthquake, etc • help in visualizing realistically the total impact of an improved evacuation plan on the insurance of a facility Dept. of CSE, UofM

20. Acknowledgements • All the experts – who chose to be anonymous • Dr. Shashi Shekhar • Mete Celik • Other colleagues. Dept. of CSE, UofM

21. 10. References • [1] Shashi Shekhar , Quingsong Lu; Evacuation Planning for Homeland Security; Department of Computer Science and Engineering, University of Minnesota, MN, USA; www-users.cs.umn.edu/~shekhar/research/problem.html(evacHSEM.doc) • [2] Lovas, G.G.; On the importance of building evacuation system components; Oslo University; IEEE Transactions on Engineering Management; Volume: 45,  Issue: 2, 1998; pages: 181-191; ISSN: 0018-9391 • [3] Qingsong Lu, Yan Huang, Shashi Shekhar; Evacuation Planning: A Capacity Constrained Routing Approach; Department of Computer Science and Engineering, University of Minnesota, MN, USA; Book: Intelligence and Security Informatics: First NSF/NIJ Symposium, ISI 2003, Tucson, AZ, USA, June 2-3, 2003. Proceedings, 2003; ISSN: 0302-9743(Print) 1611-3349(Online) • [4] Sorensen, J.H., Vogt, B.M. and Mileti, D.S.; Evacuation: An assessment of planning and research, Oak Ridge National Lab., TN (USA); 1987; ORNL-6376; www.osti.gov/energycitations/product.biblio.jsp?osti_id=5940587 • [5] Paraskevi S. Georgiadoua, Ioannis A. Papazogloub, Chris T. Kiranoudisc, and Nikolaos Markatosc c;aHellenic Institute for Occupational Health and Safety, Greece, bSystems Reliability and Industrial Safety Laboratory, National Center of Scientific Research “Demokritos”, Greece, cSchool of Chemical Engineering, National Technical University of Athens, Greece ; 2006 (Available online 28 November 2006) • [6] Nuria Pelechano and Norman I. Badler; Modeling Crowd and Trained Leader Behavior during Building Evacuation; University of Pennsylvania; IEEE • [7] C. W. Johnson; Applying the lessons of the attack on the world trade center, 11th September 2001, to the design and use of interactive evacuation simulations; Proceeding of the SIGCHI conference on Human factors in computing systems (CHI '05), 2005 • [8] Sangho Kim and Shashi Shekhar; Contraflow network reconfiguration for evacuation planning: a summary of results; University of Minnesota; Found in: Proceedings of the 13th annual ACM international workshop on Geographic information systems (GIS '05), 2005; ISBN: 1-59593-146-5, pages: 250 – 259 • [9] Claudia Zepeda, Mauricio Osorio and David Sol; Modeling Evacuation Planning Using A-Prolog; Universidad de las Américas – Puebla; 15th International Conference on Electronics, Communications and Computers (CONIELECOMP'05), pp. 292-297 … more in Paper. 20 entries. Dept. of CSE, UofM

22. Thank You • Questions? Dept. of CSE, UofM