How technology is enhancing reinsurance
The challenge to understand new risks and price them accurately has never been higher but the rewards of embracing digital technology are even greater
As the primary insurance market embeds digital into the heart of its operating models, it creates a compelling need for the reinsurance industry to pick up the pace of technological development
At a recent meeting with a managing general agent (MGA) specialising in property, I was given an insight into the extraordinary possibilities technology can bring to the insurance and reinsurance industries.
During our discussion, I was asked for my address in Miami. The MGA’s quoting platform used more than 30 sources, including satellite images of my home and artificial intelligence (AI), to validate details such as the square footage of the building and age of the roof. The technology also interrogated existing databases to get information on the age of the building and the electrical and plumbing systems used.
Within seconds – and without having to fill in a single form – I was given a detailed quote that was rich in accurate information about my property. Thanks to the depth of data the MGA had used and the deep understanding it had of the risk, had I been an actual customer it would have been able to insure my property with a high degree of confidence.
MGAs are becoming a larger part of the primary insurance market, especially in the US. MGAs tend to be started by insurance professionals who have a great depth of understanding of a particular sector and actively build technology into their business models right from the start.
Our industry is littered with examples of insurtech companies that have failed. Often, this is down to the fact they were started by technology professionals who do not really understand insurance. The most successful MGAs are founded by insurance people. They have deep insights into the challenges of our industry and the problems we need to solve. Having identified the pain points, they have then searched the market for technology that best addresses them.
Impact of artificial intelligence
AI-driven innovations are already starting to transform our industry. For example, many organisations have been able to consign the use of spreadsheets to history. Everyday data-gathering functions can be time-consuming, tedious and prone to inaccurate inputting. Digital technology can tackle these problems head-on, resulting in data being processed at speed and with higher levels of accuracy, while enhancing data consistency.
Technology is now allowing reinsurance companies to understand their clients’ portfolios at a granular level, enabling them to provide bespoke solutions. This means reinsurance companies can create products that not only improve the efficiency of their clients’ business, but can also offer strategic insights. Carriers that achieve this can become valued partners, supporting client operations throughout the business cycle, not just at renewal.
The clever application of technology to automate grunt work frees up underwriters to perform higher-value tasks such as offering clients strategic advice on risk management and insights into emerging risks that will enable them to plan well for volatility and uncertainty
Technology, of course, also allows reinsurance companies to enhance their own performance. Improved data leads to superior analytical capabilities, meaning they can move quickly to respond to unforeseen events. All these technological evolutions will further strengthen their relationships with existing clients and make them an attractive option for potential new clients.
The clever application of technology to automate grunt work such as collecting and inputting data frees up underwriters to perform higher-value tasks such as offering clients strategic advice on risk management and insights into emerging risks that will enable them to plan well for volatility and uncertainty.
Technology will not replace the role of humans, but it will lead them to carry out more stimulating and intellectually challenging tasks each day. From a business point of view, it allows reinsurance companies to significantly scale up operations without the added costs of having to hire more staff. It will also mean in the future reinsurance professionals will become more, rather than less, important to the success of the companies.
Keeping up with competencies
As the primary insurance market embeds digital into the heart of its operating models, it creates a compelling need for the reinsurance industry to pick up the pace and match these levels of technological competence. If they do not, they risk becoming a somewhat outmoded partner, which creates unnecessary friction for primary insurance companies thst are used to a more seamless digital experience. If that does happen, reinsurers risk being left behind.
As the world becomes increasingly complex, the challenge to understand these new risks and price them accurately has never been higher. However, the rewards of fully embracing digital technology and the many efficiency and operational benefits it will unlock are even greater.
MS Reinsurance is investing heavily in technology. We have upgraded many legacy systems and have developed our own underwriting, technical accounting and claims tools. These allow us to track renewals, accounts and claims from the moment they come into the time they are finalised. We have also started to use AI to help with data analysis and to eliminate data discrepancies.
It is a fascinating journey that will lead us to a leaner and value-add administration of our portfolio, which, in turn, will lead to lower expenses being pushed on to our clients, to their benefit.
Louis de Segonzac is chief underwriting officer, Americas at MS Reinsurance
