Earlier this year we partnered with an independent research firm to explore how insurers and reinsurers view the technology and processes they currently use to price and underwrite specialty and commercial risks. We’ve closely examined the reinsurance specific data to uncover valuable insights into the barriers and opportunities for reinsurers.
Here are 5 standout stats and their implications.
A changing risk landscape is challenging reinsurers
Proportion of reinsurance underwriters who believe the rapidly evolving risk landscape is the biggest barrier to underwriting risks optimally
Despite the hard market, underwriters continue to struggle when tackling the shifting risk landscape. An overwhelming majority of underwriters cited it as their biggest barrier to underwriting risks optimally.
In a rapidly-shifting risk environment, agility is crucial. A hard market might offer some protection for reinsurers, but the pressure of increasingly frequent natural catastrophes and creeping inflation begs an urgent question — are you pricing optimally to ensure future profitability? And how will your current book of business expose you to additional risk in mercurial macroeconomic circumstances?
Technology should help answer this question with improved model accuracy and agility. But in reality, reinsurers continue to face an uphill battle when it comes to pricing risk rapidly and accurately. 55% of reinsurers believe that tech issues are causing them to fail to meet the demands of a rapidly changing risk landscape.
A key issue with technologies like Excel and traditional pricing platforms is agility; clunky UIs and poorly-integrated tools prevent actuaries from responding to the challenges of the market because relevant data remains inaccessible.
By comparison, insurers leveraging Decision Intelligence software can enhance their pricing workflow by relevant external data via API at the point of pricing, leveraging internal benchmarks, and comparing A vs E on renewals — in minutes!
For actuaries, the ability to iterate on pricing tools, run what-if analyses on the entire portfolio, and monitor live performance in convenient dashboards ensures the business remains agile and prepared for market fluctuations.
Business-as-usual tasks are shackling real productivity
How long the average underwriter spends on re-keying in an average workday
In our survey, the amount of time wasted on non-value added tasks was enormous. With the average underwriter spending more than a third of an average workday rekeying data, the challenge of improving efficiency is clearly urgent.
When underwriters are saddled with busywork, it has a direct impact on the bottom line by limiting the capacity of an individual to write more (and more profitable) risks.
Traditional pricing solutions were designed to derive a technical price, without seeking to integrate the myriad factors beyond technical prices that affect the pricing decision. Wasted time is a symptom of reinsurers with siloed pricing engines that were not built to accelerate submission turnaround.
With a workflow connected to external tools like their PAS, Aviva were able to spend less time on administrative tasks like re-keying. They reduced the average time to create a policy from 1 hour to just 10 minutes — not to mention saving the 20-30 minutes it took to open their pricing software!
Pricing model development and iteration is painfully slow
How long it takes actuaries to make a simple parameter change
On the actuarial side, small tasks like simple parameter changes are still taking actuaries over a month to action and deploy. In many cases, this is due to brittle infrastructure or a reliance on IT teams to make changes.
The value of progressive iteration may not seem immediately apparently — but as a reinsurer, your ability to capture your pricing actions, and the outcomes of those actions, is the foundation of your competitive advantage.
With the right system, your own pricing data can be taken as an input to future decisions — making those decisions smarter over time. It’s much like compound interest.
After implementing hx Renew, Conduit Re noticed...
"No data put into hx Renew is lost. With Excel, everything gets trapped in a spreadsheet and is unusable in the long run. In hx Renew, we can aggregate all of our pricing data, for example, by line of business, and use that to create our development factors. The ability to move a case easily from one year to the next to help with renewing the policy is valuable for the team."Stuart Quinlan, Deputy Chief Executive & Chief Operations Officer, Conduit Re
And with improved access to data, the team at Conduit Re is reducing time spent on data processing and powering additional, value-add portfolio analysis.
“The implementation of our pricing models in hx Renew has allowed us to react more quickly when making changes to our inflation methodology as well as enabling self-serve updating of parameter tables.”Andrew Couper, Chief Actuary, Conduit Re
Pricing teams are wasting days on processes that could take hours
How long is takes an average pricing team to complete the peer review process for a submission
Reducing quote turnaround time, without sacrificing pricing accuracy and due diligence, requires a team effort between actuaries, underwriters, and the tools that connect them. Yet important-but-mechanical aspects of pricing, like peer review, remain incredibly manual.
This might contribute to 45% of reinsurance actuaries and 53% of reinsurance underwriters believing that there is room for improvement when it comes to effective collaboration with each other!
However, with the right decision-making architecture, reinsurers can start to turn days into hours — in many cases reducing quote turnaround time by up to 50%. By leveraging workflow accelerants like automated quote document creation and in-model peer review, collaboration between actuaries and underwriters becomes straightforward (hopefully closing the gap felt today!).
Reinsurers recognize there is a skills and technology gap
Percentage of reinsurance actuaries and underwriters worried about not having the right tech skills for the future
When the hard market begins to soften, prices fall, and competition heats up, many reinsurers will see these issues manifest in lower loss ratios and missed market opportunities.
But understanding the deficit in skills and technology is the first step to fixing it. Alongside the stated skills gap, 81% of actuaries and underwriters are worried about not having the right pricing platform.
More than half of those we surveyed believe their existing tech is:
Causing them to waste too much time on admin and repetitive tasks
Leaving them unable to price optimally because of integration issues
Preventing them from making the most intelligent pricing decisions
Many reinsurers still struggle to imagine a world where actuaries and underwriters had technology which dealt with all of these issues, cultivated market leading skills and freed up their time to get ready for the future and invest these new skills into outperforming the market.
But the tools and technologies required for pricing transformation are out there.
Most have decided change is needed
Recognizing the issue is one step towards finding a solution. Acting is another.
Customers we work with understand that good pricing decisions go beyond generating a better technical price.
Pricing technology should not be divorced from all the other data and people you use to help you make a decision — what we call your “decision engine”.
To better understand how to structure your technology stack to empower decision making, read our piece on What is Pricing Decision Intelligence?