Commercial insurance entering the digital age
It’s fair to say digitalisation for commercial insurance has been lagging behind the personal lines sector. Part of this is simply because the risks are bigger, more complex and often require tailor-made covers. But the commercial market is moving forward and big steps have been made by some of the leading players to address digitalisation. Tony Dowding reports.
Digitalisation and the use of technology by the commercial insurance sector finally appear to be gaining some traction, which is good news for risk and insurance managers. No one wants to deal with a slow and inefficient service provider, and the insurance sector has realised the need for change and investment has been made.
Jörg Bertogg, chief operating officer for commercial insurance, Zurich Insurance Group, admits that commercial insurance has been moving at a slower pace of digital adoption in comparison to other areas such as personal lines. He says there are many reasons for this, such as complexity, scale, nature of the business and so on, but he believes now is the time for this to change. “Technology has progressed to a point that we now have valid solutions to some of the most technical challenges, which we can leverage to make real improvements in the way we transact business,” he says.
Matthieu Caillat, AXA XL’s chief operating officer, agrees that the large P&C insurance sector hasn’t matured at the same pace as personal lines, as the risks covered are by definition larger and more complex, and their underwriting requires a higher degree of customisation.
“In commercial insurance, clients also have different expectations from carriers. Insurers have to take into consideration specific coverage needs that can help clients better manage their risks, therefore off-the-shelf solutions – which can be commoditised and digitalised more easily – simply don’t cut it,” he says.
But he points out that digitalisation in the large P&C insurance sector has started, “with some markets and players clearly making it their strategic priority, and it will accelerate”. He adds: “There is a huge, largely untapped opportunity to push digitalisation much further in the large P&C and specialty insurance space.”
Ian Haycock, group CDO and CITO, Swiss Re Corporate Solutions, says that in commercial insurance, data transfer between parties in the industry is still inefficient, and corporate risk managers don’t easily have tools that can translate their data into real risk insights.
“One fact is certain: business in the future will increasingly be digital, whether the industry makes a giant leap or gets there in small increments. We will see this in multiple areas, such as data exchange, access to insights from expanded datasets or even support for contracts – technology will increasingly permeate the business model. Despite some overhype in recent years, it’s taking longer than advertised but it will happen,” says Haycock.
He says there is no doubt that broader and more diverse datasets lead to additional insights and value for all parties. “Taking an example from the physical world of manufacturing, we already see how manufacturers can improve their products based on real data from sensors regarding the usage of the product and as such can create adaptive, optimised maintenance schedules. This creates a win-win-win scenario – the purchaser of the equipment can optimise downtime to suit plans, the manufacturer can provide a more tailored service, and the insurer can provide insights and cover for the most important risks,” he says.
Benefits
There are many benefits for insureds, says Caillat, such as better service through efficiency, enhanced coverage and additional risk insights that allow improved risk management. Automation of low-value tasks frees up risk engineers, underwriters, claims handlers or policy managers “to focus on the most complex and value-added missions: designing and delivering the best solutions for complex needs”, he says.
He explains that more and better data enables a deeper understanding of risks. Insurers can leverage better data to optimise the way they deploy capacity and provide the best possible solutions for their clients. And when leveraged appropriately, AI, machine learning and data insights can allow insurers to identify gaps in the market and bring new solutions to the market faster and more affordably than in the past, he adds.
Bertogg says: “Through the efforts we are making around collaboration and communication of commercial insurance data, we have already seen significant efficiency gains that translate into real added value to the insurance value chain. Digital transformation also opens the door to new opportunities around the integration of additional service providers that further extend the value insurers, risk managers and brokers can extract from their relationships.”
But how does digitalisation in the insurance sector allow insureds to get greater visibility of their risks and claims information in a way that is really useful for them?
“Risk managers want to get better at managing their risks,” says Haycock. “We help them overcome the three main hurdles they face. First, their data is disorganised and dispersed across different systems. They want a data infrastructure that acts as a single source of truth for risk-relevant data. Moreover, they want to be able to put their own risk data in for presenting their risks correctly to the insurance market. Second, they don’t have access to risk tools and models, for example, to assess and quantify risks. They appreciate being able to manage data on their own and immediately receive assessment results based on the experience of Swiss Re and other service providers, without having to rely on outside human intervention and the associated lead times. Finally, they find it difficult to collaborate because of the technical, cultural and legal challenges in sharing the risk data and insights within the organisation and with third parties. We help them store their data in their own private environment and yet securely share the risk insights.”
Bertogg believes transparency and speed of data access are key to getting a better understanding of risk and to becoming a driver of good decision-making. “Having access to consistent and real-time claims and risk data allows a greater level or analysis and insight generation, which opens up different ways of thinking about how our data can be used to drive improvements. Here, application programming interfaces are a very efficient way to connect carriers, brokers and insureds, enabling enhanced collaboration as well as safer and faster exchange of relevant data.”
Tripartite approach
The talk of carriers, brokers and insureds is important, because it is clear that this is a tripartite issue. “In fact, this is a topic that affects the whole marketplace, including other third-party service provider,” says Bertogg. “The real benefit of digital adoption is the access it provides to collaboration and communication of data, and the implications this has on how all parties in the value chain act. Individual organisations making change does drive the process forward, but only once all parties are moving in the same direction do you get to see real benefit.”
Ian Long, head international programmes proposition, Swiss Re Corporate Solutions, notes that insurers’ systems are fed with the data provided by their brokers and clients. “The integration of quality data into insurers’ systems will increase process efficiency, gain transparency and ensure contract certainty,” he says. “Brokers, insurers and insureds collaborate in a continuous process to issue policies and face similar problems with their systems.”
RMIS growth
There is significant growth in risk management information systems (RMIS), with more and more insureds looking for solutions to manage the large volumes of data that underpin commercial risk management. As Bertogg points out: “Ultimately, these systems need to be flexible enough to react to the ever-changing demands of corporations and to be able to quickly integrate services for new risks that are presented.”
Of course, what risk managers want is full transparency and control over their risks. “They want an easy-to-use way to manage the risk-relevant data, the ability to identify potential issues and act on them, and support for sharing information with brokers or insurers,” says Haycock. He adds that current RMIS tend to collect large amounts of information that is just stored and is often not really needed. “However, raw data on its own does not create value. Actionable insights must be derived from it to enable risk managers to take action. Additionally, this vast amount of data must be managed and kept up to date, which is a labour-intensive process,” he says.
Looking forward, risk managers will be looking for innovation and further benefits from technology. “When we ask our clients what keeps them up at night, they almost always answer ‘those that aren’t insurable’,” says Caillat.
New risks are constantly emerging and can be difficult to predict. “We believe that in the future, insurers will supplement their traditional offering with enhanced risk prevention solutions, services and advisory capabilities,” Caillat says. “This will allow them to have a more holistic view of their risks and access to a full ecosystem of solutions that go far beyond pure risk transfer. Our ability to leverage data can help our insureds solve some of their most pressing risks, which sometimes can’t be covered by the market.”