The 4 trends specialty insurers should be watching

The insurance sector is in a period of seismic change, but what are the real trends specialty insurers should be taking note of.

hyperexponential has released a new report on the major trends currently disrupting the specialty insurance space.

The first major trend outlined in the report is how technology is building a new world of risk. It states that the rate of technology innovation is creating a new level of risk, which offers an opportunity and challenge to specialty insurers.

It said, “How do you assess the risk associated with crypto currency? How do you underwrite the risk of an autonomous submarine crashing into an oil pipeline causing an ecological disaster, and how do you insure against medical malpractice for a Medtech device performing an automated AI powered diagnosis?”

Assessing risks requires using known factors and using that to model the unknown; however, new technologies are creating increasingly more unknown variables. To tackle this, firms need to transform how they utilise data.

Its report states that it cannot rely on outdated data models based in Excel, instead, they need a holistic approach to exposure, and they need to constantly assess and reassess risk across the whole portfolio.

The second trend outlined by hyperexponential was the explosion of internal and external data sources. Citing a report from IORG, it said that 90% of the world’s data was created in the past two years, and Statista estimates that 74 trillion gigabytes of data was created in 2021 alone.

It said, “For an industry that relies on data to model future risk, this must be seen as a positive. However, the challenge we face is how we turn this overwhelming amount of data into meaningful ‘data assets’ that we can trust and utilise.” For example, actuaries waste hours collating and manipulating data, where technology can be used to handle the manual workload and free up time for actuaries.

The third trend in the report is around the disruptive ecosystems and digital value chains. It highlighted the need for industries to have the ability to quickly adapt to changing markets. Digitalisation has enabled new ecosystems to be created and every company to become technology driven.

It stated that there is a technological revolution which is redefining the value chain and forcing traditional institutions to enter a fast-paced, innovative ecosystem. With all this, there is a new generation of InsurTech companies being born, which enable transformation and the creation of powerful decentralised ecosystems that seamlessly connect brokers, insurers, reinsurers and MGAs, it said.

The final trend highlighted in the report is agile and real-time risk management. This final trend is the culmination of the previous trends. It explained that more diverse and complex risks require a different approach and actuaries need to quickly build new models or rework existing ones to meet new parameters.

The data explosion has also meant firms need to handle real-time data as opposed to static datasets. While the move from managing risk-on-risk to a holistic approach is changing the actuarial model with a need to continually assess and reassess risk across the full portfolio. This requires continually adapting models that leverage new data and offer real-time views of portfolio risk.

It said, “This is driving the need to master data and create platforms that enable new models to be built in days, modified in hours, released in minutes – and then for the data from this model and all your prior models to be analysed instantaneously.”

Read the full report here to find out more about how technology is revolutionising insurance.

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