Last week, Property and Casualty 360 published a post by Sean Allen entitled 4 areas for the Insurance Industry to Modernize. The article is based on the consensus after the Xchanging London Market Conference last November, and it starts with:
Fair or not, many look at insurance as an outdated industry, lagging behind others of similar stature and scale when it comes to innovation.
Insurance? Innovation? And the suggestion that the former is lagging on the latter? This is all rich material for the Risks of Hazard. So, what are those 4 things that need to be modernized, then?
Two of them are irrelevant to property insurance underwriting: tackling cyber and finding new recruits to staff the industry as up to a quarter of insurance people retire in the coming few years.
The two that are relevant for P & C are: digitization/automation and big data analytics. No surprises, but definitely reinforcement.
Underwriting software (not cross-purposed accumulation software) is one aspect of insurance that is leading innovation. Location-specific risk assessments are coming from both digitization (by replacing paper maps – yes, really) and automation (with configurable risk scoring). The second area that needs to be modernized, big data, depends on the digitization and automation of the industry to be possible - there is no analog way to deal with big data. Underwriting analytics are using huge geospatial datasets ( including elevations and proximities) and in-house datasets (predominantly claims).
Digital and automated analytics that access big datasets, drive underwriting profit in two ways:
- The process of underwriting is made more efficient, requiring less time to approve and rate a risk.
- The risks approved are more compatible with business requirements, while undesirable risks are rejected with little to no effort from the underwriter.
Mr. Stefan Holzberger from AM Best explains how hard it is now, and will be in the future, to achieve underwriting profit. Modernizing these two areas of insurance will help underwriters achieve that profit.