Discover how data undervaluation in specialty and commercial insurance impacts pricing insights and portfolio decisions.
According to new research commissioned by pricing decision intelligence company hyperexponential, specialty and commercial insurers may not be fully appreciating the high value of data that might aid in improving pricing and portfolio decisions.
The largest data problems for insurers are mostly based on location, according to a poll of 350 specialty and commercial underwriters and actuaries about insurance technology performed by independent research firm Coleman Parkes.
While access to real-time visibility into portfolios is the top concern for US respondents, internal compliance and challenging processes are the biggest problems in the UK.
Large datasets cannot be reliably and quickly ingested and processed by insurers’ basic technology. In the end, this problem means that they are unable to use this data to produce insights about how to better price risk.
In general, 83% of the underwriters and actuaries polled expressed dissatisfaction with the technologies currently in use. Only 19% of respondents claimed they could make data-driven judgments thanks to technology.
These high levels of unhappiness with current technology at companies may be due to pricing. 56 percent of respondents said their pricing systems are not delivering on what they had promised, and 45 percent said that despite investing in new pricing technologies, they had not yet seen any return on their investment. According to Hyperexponential, this is because conventional pricing tools serve more as “spreadsheet replacements” than as decision-making engines.
Estimating risk incorrectly and spending time on administrative tasks
The findings, according to Tom Chamberlain, VP of customer and consulting at hyperexponential, are that pricing decisions are the most significant lever insurers can use to influence profit and loss, but few have been successful in making a significant transition.
IoT, drones, social media, dash cameras, and wearable technology like smartwatches can help specialty and commercial insurers price and assess risk more accurately than ever before. Despite the fact that pricing involves so much more than simply a single number, many continue to believe this. Pricing insights can be applied to create better business decisions when combined with the appropriate data and technology.
According to our research, a new generation of commercial and specialty insurers is painfully aware of these shortcomings, and those who can adopt contemporary pricing technology and methods will prevail.
Highly skilled and well-paid underwriters and actuaries waste important time on menial administrative work as a result of lengthy and challenging underwriting procedures carried out on antiquated technology.
On average, underwriters enter data for three hours each day. Actuaries typically need 192 days in the US and 150 days in the UK to release new pricing models. According to respondents, the risk landscape is changing too quickly, which is the primary obstacle to underwriting today’s growing risks.