Data Partnerships Reshape Commercial Risk Underwriting

Data partnerships have been in existence awhile. The size of the global alternative data market is slated to top $17.4 billion by 2027 at 40.1% CAGR. This growth has multiple implications for insurers who lack the means to harness large data stores. Benefits range from new markets access to augmented customer experiences. Underwriters gain more ways to unlock the value of data and push decision making to the point-of-sale.  In the post-pandemic environment, improving underwriting performance is imperative, being one of two key traits (along with pricing sophistication) that industry leaders have in common.

Commercial Risk

In commercial risk, a growing number of stakeholders are joining forces to bring automation and predictive insight into underwriting. Underwriting insurance risk is time-consuming with as much as 40% of effort spent on repetitive tasks. Additionally, evolving business structures and a changing market make it challenging to underwrite risk. In such a backdrop, carriers are embarking on commercial risk underwriting transformation with technological advancements. To augment data, manage losses, and tackle emerging risks, carriers are forming partnerships with insurtechs.

UW Data Platforms

Underwriting data platforms assimilate alternative datasets, such as social media logs, public records, and demographics. Insurers augment their own internal datasets and, ultimately, enhance the speed and quality of the underwriting process.

Examples of UW Data Platforms include:

  • Cytora: Enables underwriting for commercial insurance via its API-enabled Underwriting Platform allowing insurers to underwrite efficiently and offer fairer prices.
  • Squirro: Offers augmented intelligence solutions to provide insights from structured and unstructured data.
  • Convr: Underwriting decisioning platform for commercial P&C insurers, that enables real-time underwriting decisions.
  • Groundspeed Analytics: Automatically turns loss runs, exposure documents and policy files into actionable information, empowering users to identify profitable pools of risk.
  • App Orchid: Transforms the contracting process, improves analysis and negotiation of contracts by ingesting and analyzing historical contracts to author templates based on terms that were proven win-win.

Hiscox, a leading small business insurer, partnered with Convr to gain additional insights on risks from thousands of third-party data sources, helping to ensure underwriting and pricing accuracy. Convr uses AI to classify a business and respond to underwriting questions, enabling risk selection and prioritization to better focus underwriting resources. Another example of an innovative data partnership is between Gaia, a new insurance product that is making fertility treatments more accessible by alleviating the financial burden of IVF and Lloyd´s Lab.

Beyond Insurtechs

Carriers are also looking beyond insurtechs when scouting for such data monetization partners, identifying companies well established in their traditional markets. Such organizations have access to big reserves of data as well as considerable market knowledge and expertise. They provide valuable insights on best avenues to capitalize data reserves. Several carriers have teamed up with companies from other industries, some examples being:

  • Specialist insurer Beazley collaborated with healthcare risk manager The Risk Authority Stanford (TRA) to enhance its claims database, identify trends and improve patient safety.
  • Allianz Global Corporate and Specialty, has combined with analytics company Praedicat to help customers improve their handling of chemicals and better manage risk related to handling chemicals.
  • Specialty insurer XL Catlin, recently acquired by AXA, is working with the Driven autonomous vehicle consortium in the UK to analyze data from the consortium’s trials to determine the risks that are likely to be borne by the manufacturers, owners and operators of self-driving vehicles and develop insurance cover.

The monetization of data could generate up to US$8 billion of annual profit for the global insurance industry. Industry averages peg loss ratio improvements at 3-5%, new business premiums increase of 10-15%, and retention in profitable segments rise of 5-10%, with digitized underwriting strategies. Top performers are gaining the lead, enhancing their ability to proactively identify market opportunities ahead of competition.

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