In the evolving landscape of insurance, there is a stark need for adaptation. The rampant shift towards digitalisation has impacted the very core of how insurers operate, but the data-driven wave hasn’t been smooth sailing. Underwriters and actuaries, key players in the industry, voice discontent with contemporary processes.
InsurTech company Hyperexponential recently explored was why Specialty and Commercial insurers need to rethink their approach to pricing.
A primary concern is the decision-making in risk assessment and premium pricing. These decisions hold massive sway in the Profit & Loss statements of Specialty and Commercial insurers. Alarmingly, an overwhelming majority, 89% of those surveyed in the UK and 78% in the US, believe their pricing technology demands enhancements. Furthermore, a scanty minority, fewer than 20%, view their pricing methodologies as genuinely data-driven.
The ramifications of these concerns are substantial. About a third of UK underwriters identify a direct hit on their profits due to subpar pricing models. Additionally, 20% of actuaries are concerned that these inefficient models tarnish their company’s reputation, leading to a potential future profit risk.
Despite this stark awareness, tangible change is slower than desired. A promising 98% of those surveyed are either presently investing in pricing technology or have plans to do so in the upcoming year. However, the promises of these technological implementations often fall flat. Over half, 56%, feel their new pricing platforms don’t fulfil promises made, and a concerning 45% haven’t perceived any real value from their recent technology acquisitions.
Integrating new tools with legacy systems proves another roadblock. A significant 57% feel stifled by integration issues, which hampers their ability to price and underwrite optimally. This is hardly shocking, given that 25% still depend on outdated ‘super spreadsheets’.
In our hyper-digitalised era, data generation is immense – approximately 1.7 megabytes every second for each internet user globally. This vast data, collected from various sources like wearables to sensors, poses a challenge for traditional tools.
The rapid and ever-changing risk environment creates another layer of challenge. A staggering 71% of US underwriters and 54% of their UK counterparts struggle to keep up. This constant evolution demands tools that not only sync with old systems but also possess the muscle to process vast datasets, analysing and forecasting potential scenarios.
With the acceleration of market evolution and the rising prominence of AI, standardised data is becoming commonplace. Insurers now need to delve deeper, harnessing complex datasets to maintain a competitive edge. The true differentiator will be the ability to extract valuable insights from fragmented data sources and use them for sustained growth and improvement.
For a more comprehensive view on this subject and insights on successful pricing transformation, the full “State of Specialty and Commercial Pricing 2023” report is available for download.
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