During the last 18 months, there has been regular commentary on the state of the insurance market, with much emphasis put on technology and big data as the key instruments of change. This is an exciting time, as some of the leading organisations embrace technology and big data to help them take a fresh look at how they more effectively leverage their expertise and ensure a successful future for the industry.
The Wholesale Broker Market Study recently published by the Financial Conduct Authority (FCA)was originally launched in November 2017in response to potential competition concerns raised by practitioners and as a result of the FCA’s own analysis of the market. It was reassuring to note that the FCA concluded that the larger broking houses continue to conduct themselves properly, but maybe the more surprising part of the study was the way in which the regulator chose to give its own view on what lies ahead.
Whilst the study recognises that some larger London brokers have developed their offering around consultancy-style services, the FCA calls for all brokers to consider their individual contribution, to ensure London remains competitive.
'All of these changes will require brokers individually to consider their business models and innovate, to ensure London remains competitive.'
Consultancy-style services such as basic data provision; data analytics; sector consultancy reports; insurer feedback and pipeline review discussions are increasingly used as new revenue streams for brokers in challenging market conditions.
Data presents a significant opportunity to the entire insurance market. Whilst the larger brokers may have access to a larger volume and variety of data, the industry has traditionally focused on a limited dataset to deliver insurance products and services to clients. Big data and InsurTech solutions designed specifically for the insurance market provide everyone with an opportunity to gain a deeper understanding of loss behaviour and expand upon existing insurance expertise. Specialist platforms developed by InsurTechs allow the industry to combine non-insurance datasets with loss and exposure data to establish a better picture of client risk to the benefit of all industry players. By leveraging data and technology within the industry, decision making can be optimised, process efficiency can be improved, and the industry can spend more time sharing their expertise face-to-face with clients.
Our advice to the market-be alert to what is possible in 2019 and to understand the opportunities that technology will bring to the insurance industry over the next few years.To stay in the game, all insurance companies should:
Leverage Your Data
Invest time and effort to cleanse and update your data so that it can be leveraged to your advantage. Inaccurate or missing data leads to poorly informed decision making so it’s important to get the foundations in place first. Automating early data analysis, research tasks and data preparation allows the market specialists to focus more time on building relationships and meeting prospects. The view in most companies is that their data is of poor quality. In many cases it is, but technology can be used to cleanse, based upon informed assumptions.
Once your data is in order you can compare vessels, fleets and clients to gain a better understanding of underperforming and overperforming client accounts within your portfolio. Once you have the information, you can then take action to improve risk selection and portfolio performance.
Armed with a clear view of your client accounts, you can progress to making better decisions regarding your overall portfolio.There area few ways you can do this:
- Remove unprofitable client accounts from your portfolio at renewal stage or adjust policies to better cover the risk.
- Improve risk selection by profiling profitable client accounts and targeting prospective clients with similar portfolios.
- Adjust line size up or down based on a better understanding of the risk within client accounts to mitigate risk and improve loss ratios.
- Make more informed decisions regarding facultative insurance to further limit potential losses in high risk accounts.
Take a more proactive approach to risk mitigation for your clients by automatically flagging opportunities to limit their risk exposure and provide additional protection where required. When client fleets enter high risk areas such as war zones or ice zones, alerts can be automated to trigger additional war zone policies for the time spent in the area. This provides the additional cover the client needs but limits the increase in premium in order to keep costs down and deliver the highest level of service to your client. Alerts can often be customised to highlight gaps in current client cover to allow for new and more flexible products and services to be offered as a valuable addition to existing policies and new sources of revenue for your business.
Using the latest developments in Artificial Intelligence (AI) and Machine Learning (ML), solutions exist that will help you to:
- Predict your projected loss ratio based on your current portfolio.
- Determine the optimum pricing and line size for new business opportunities.
- Gain visibility of the marginal impact of each new deal on your portfolio and loss ratio before you write the business.
When combined with the vast expertise of actuaries and underwriters, this is a powerful combination for efficient and effective risk management.
The adoption of technology and data is no longer optional for the insurance market. By embracing the digital future of the insurance market, brokers can strengthen portfolios, develop long lasting relationships with their clients and ensure that London remains competitive.
Access the full FCA Wholesale Broker Market Study here.