The Risks of Hazard

Have you heard it’s raining in California? Los Angeles has broken precipitation records for July, and there have been flash floods throughout southern California and Arizona. The Angels even had a ball game rained out for the first time in over 20 years. The moisture has helped with the drought and a bad wildfire season, but it has added to the headaches of property insurers writing in California. Weather from the west coast is regularly newsworthy, but this past week has been extraordinary. How weird has it been? It even snowed in the Sierra Nevada this week.

It’s time to take a second look, as promised, at last month’s Inside the Minds of Insurance Innovators, a Q & A session about innovation that features 16 leaders within the insurance industry. Published by Carrier Management, it provides a rare and real opportunity to consider industry ideas that are both common and unique. This post is dedicated to the latter, highlighting the three responses that stood out to me the most. 

Carrier Management published a great feature on innovation in P & C insurance last month (June 2015). Inside the Minds of Insurance Innovators explores the subject of innovation with a group of 16 leaders from different carriers, reinsurers, brokers, rating agencies, and (for good measure) a modeler, by asking each of them 11 questions. The questions and responses present an overall picture of how a 400+ year-old industry approaches the future at a time when the business and technology is changing faster than ever before, and the speed of change is still accelerating.  

There are some definite trends in the responses, and some complete outliers. I'd like to explore what these 16 industry thought leaders are telling us with a two-part series: In today's post I will focus on the consensus. Later in the week I will look at the not-so-universal responses, which are interesting of course because they're different.

The National Research Council (NRC) published a report in June that explored how FEMA’s National Flood Insurance Program (NFIP) appraises flood insurance in the U.S. It is a very thorough and technical document (as one would expect), that reaches ten conclusions on how NFIP can improve its pricing strategies to become, essentially, more solvent. The conclusions focus on different aspects of how a policy price is determined, including the use of loss/claims data, the risk analysis, flood modeling techniques, damage and exposure estimations, replacement costs, and other factors. One conclusion stood out for me, and I wasn’t alone.

These days, business software (and technology in general) evolves faster than ever before. Users have access to rapidly improving analytics based on huge datasets; flexibility on how questions are asked; and — most importantly — how answers are received and interpreted.

In the past 10 years or so, business systems have moved from desktop-based programs to much more dynamic applications that are simultaneously more specialized and more universal. Business solutions now leverage more data to deliver answers that are very specific to an industry, to an organization, and to specific users. There are several technological cornerstones that make today’s systems so powerful, and one of them is the Application Programming Interface, or API.

How do APIs play such a big role in today’s software? Well, they're like LEGO blocks.