With over 62% of airplanes grounded in April, the value of the top 10 insured airports has shifted, said Suki Basi, managing director, Russell Group speaking to AM Best TV.
In a digital market, risk context is as important as risk data
11 January 2021 | Blog Post
Republished with the kind permission of Insurance Day. Read the PDF version of the article in full here [page 6 out of 8]
“Lights, cameras, action” is the traditional cue to a film crew at the beginning of a movie take. The London insurance market is currently directing a new wave (or dare I say, nouvelle vague!) of more individualistic and stylistically innovative technology designed to lead the market into a bright and bold future. Not so much “lights, cameras, action” more like: “insight, analysis, action!”
One of the long-lasting legacies of the COVID-19 pandemic will be the continued acceleration in the use of technology within all our personal and working lives.
Pre-COVID, technology was seen as a useful addition to our everyday lives. Yet, during the pandemic, this relationship has shifted dramatically.
Whether it is hosting office meetings on Zoom or Microsoft Teams to having office social events online, technology has become the enabler of our personal and social lives.
Over the last three years, many business leaders had talked about the need to implement digital transformation across their organisation, insisting that they had robust plans to meet the digital needs of tomorrow.
However, it seems that many leaders were guilty of ‘talking a good game’ rather than implementing the necessary change.
A survey of 1,200 Business leaders by Pegasystems, a US software company specialising in customer engagement, found that over 74% of business decision makers said that the COVID crisis had exposed more gaps in their business operations than they had originally expected. Therefore, it was no surprise that 62% surveyed vowed to increase the priority level of the digital transformation within their organisation.
While all industries are moving towards a wholesale adoption of technology, the insurance industry, in particular the London Market, has been less susceptible to technology changes than other industries. With higher market barriers to entry and higher emphasis placed on personal relationships, many attempts at radical technology changes in the past have fallen by the wayside.
This was before the COVID pandemic. The pandemic shows that Lloyd’s and the Companies market, for example can readily adapt to today’s fast-changing environment. The virus has only increased the market’s hunger to develop and make further change happen as the Chairman of Lloyd’s has recently made clear.
Change has certainly come to Lloyd’s, with the market trialing a ‘virtual underwriting room’ after lockdown measures prevented it from doing business at Lime Street. This follows progress in the use of PPL during lockdown, with a 15% rise in the use of the platform according to Managing Director of PPL, Sue Jakobek.
Lloyd’s double-downed on this approach in the unveiling of Blueprint Two, with a pledge to support the “next generation” of placements at Lloyd’s; increase automated claims recognition and facilitate faster claims payments. The goal is to make Lloyd’s a digital marketplace that is “data-driven and digitally enabled”.
A greater emphasis on digital platforms such as PPL have left many senior underwriters concerned that their colleagues will overlook the nuance of a risk because they are looking at it on a piece of paper, as I recently read in a U.S. insurance publication.
It is this complexity and nuance involved in the risk data (the context) as it moves through the insurance value chain that needs to be addressed before the industry can move to any sort of wholescale adoption of data.
By value chain, I am referring to the movement of risk data from the insured to the insurer, reinsurer and retro-insurer via brokers and intermediaries. When the industry talks about data and the need for greater data or technology initiatives, many overlook this vital point.
If the context surrounding the risk data from the customer is lost as it moves through the value chain, then it doesn’t matter if you have more data because the underlying issue of addressing the customer’s risk needs is not being addressed. Given the interconnectivity of risk and the many business relationships in the value chain, everybody connected to the insured in the value chain is vulnerable to the aftershocks of a direct or indirect risk event that affects that insured. There will increasingly need to be more of a focus on insight, analysis, and action.
At the same time, there needs to be a coherent “naming convention” for all companies being insured, because as the risk data moves from the value chain, the name of the insured gets “lost in translation”.
Surely a better, more integrated, and collaborative approach is needed? Rather than focusing efforts at the insurer-end, any new initiatives need to be customer-led. Better risk data and context from the insured end needs to be maintained as it moves through the insurance value chain.
In other words, the better insights gained from the risk data at the insured-level will lead to better analysis by the insurer and substantial action by the (re)insurer.
A more connected approach.