Part three - New Sources of Risk and Opportunity
The marine insurance environment is by its very nature behavioural and, in my last post, I explored why marine insurers have settled on a set of standardised and static rating factors and the impact of adopting data and analytics to drive behavioural insights.
The last post explained the first benefit of a data-driven approach - segmenting and optimising your existing portfolio. This post will look at the second benefit, which is identifying new sources of risk and opportunity.
Identifying new sources of risk and opportunity
A natural consequence of moving to a data-driven approach in the marine market, is a sudden differentiated view of marine risk to other market competitors. For those companies who act early, this knowledge can be used to aggressively develop business within the existing capacity limits in three principal ways.
First, part of identifying the characteristics that drive portfolio loss is also identifying the mix of characteristics that would impact the portfolio in a positive way. Companies can then use data science technologies to search global fleet and claims databases against these selection criteria, to identify target accounts that have a positive impact on the portfolio.
Increasing shares on profitable lines
Second, we have already discussed the standardised approach to rating that is prevalent in the marine insurance market. For companies who embrace data and analytics, accounts that have been discriminated against as a result of rule of thumb bias, now become new opportunities. By being able to analyse the unique risk profile of each and every fleet and understand its impact to the portfolio, companies can search out new opportunities that the market has designated as high-risk and increase revenue as a result.
Third, as companies use this data more and more and gain deeper and deeper understanding of loss behaviour, they will start to spot new opportunities for composite marine programs. In a break from the global, annual policies that are prevalent in the market today, these companies will be able to assess the risk profile of the customer and recommend unique composite coverages that reflect their needs. Not only will these new products generate additional revenue streams, but will also serve to change market dynamics and put the power of selection and pricing back in the hands of the underwriter.
Once you’ve identified these new sources of risk and opportunity, what is the next step to turn this opportunity into something tangible? The answer is connected policies - targeted coverage that reflects what a vessel is doing at any given point in time.
Tune into the next blog in this series to find out exactly how connected policies, which exist already, can be taken even further with technology to bring down combined ratios.
In the meantime, if you’re interested to find out more about Concirrus, our work in the Marine Market, take a look at this case study which directly illustrates the bottom line impact of our software Quest Marine.