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The Transformative Impact of Information Technology on Insurance

By Mary Kotch, EVP & Global CIO, Validus Reinsurance And Marie-Christine Razaire, Underwriter, Validus Reinsurance

Mary Kotch, EVP & Global CIO, Validus Reinsurance

The global insurance marketplace will be undergoing a radical reformation in the coming decade which represents a meaningful opportunity for marketplace visionaries. Thus, the management teams at global insurers and reinsurers can no longer consider themselves insulated from the consequences of rapid information technology change.

By leveraging innovative insurance technologies, organizations have a path to profitable growth that allows for low-cost scaling, diversification and Merger & Acquisitions (M&A) activity. Accordingly, a deep understanding of an organization’s internal and external technology, along with its associated impact on the marketplace, is a non-negotiable requirement for any executive engaged in strategic planning.

The need for such strategic planning is more important than ever. The insurance/reinsurance business faces multiple challenges; years of soft-market conditions followed by sudden and sharp hardening periods, tremendous losses from man-made and natural catastrophes and open-ended liabilities such as for terrorism and asbestos have all put severe pressure on reinsurers.

These difficult conditions require rapid adaptation and solution creativity to manage downside risk. Traditionally, such risk is controlled through sophisticated analysis, careful pricing, and prudent capital management.

However, technology is increasingly impacting how carriers approach their internal processes, collaborate with partners and staff, develop and distribute products and services, and meet regulatory and compliance challenges. In order keep pace with the rapidly changing marketplace, companies are now also investing in numerous technology areas. These areas include data analytics, workflow, core system replacement, and sophisticated modeling tools.

"By leveraging innovative insurance technologies, organizations have a path to profitable growth that allows for low-cost scaling, diversification and Merger & Acquisitions (M&A) activity"

In addition to technical systems, new data access and data-driven solutions will be necessary to meet the challenges of reinsurance and insurance trends. Flexible data architectures, platforms and analytics tools will be required to transform mountains of diverse data sets into actionable knowledge.

But in the insurance/reinsurance organizations of the future, such expenditures should be baked into the strategic planning process and be considered in the development of new products and services. Even the identification of acquisition targets should be modified to exploit data and technology synergies, which in turn will diversify and grow the business.

Established insurance/reinsurance organizations ignore this new technical reality at their peril. Technology-based startups, unhindered by cumbersome legacy systems, have redefined core processes and are targeting all parts of the insurance marketplace. Many newcomers are focusing on distribution, using new technology to reach consumers that traditional insurers miss. Other start-ups are looking at new types of analytics in order to make better underwriting decisions.

Marie-Christine Razaire, Underwriter, Validus Reinsurance

Blockchain—the technology that underpins Bitcoin—is increasingly popular, while health insurance has been a big area of start-up activity in the US. Start-ups are also targeting the potential of the “internet of things”—the growing use of data-collecting devices in everyday items, from cars using telematics systems to connected homes.

The Road Ahead - Insurance Disruptions (2018 and beyond)

Artificial Intelligence - The wealth of data now available is permitting a number of ventures to leverage AI to drill into data and provide incredibly fine-tuned and tailored policies.

Customer Experience - Large amounts of real-time sensor data, unstructured data from social networks, and data such as text, voice and video can now be leveraged to engage with customers. This allows insurers ability to adjust to increasing demand from customers for a meaningful well-informed relationship with their policy provider, which ultimately provides true value.

Claims Management - Providing the capacity to process huge amounts of claims data at a fraction of the time, and gain intelligent insights and decision-outputs as a result. Claims automation eliminates the burden of responsibility, and in some cases, a claims decision can be removed entirely from the shoulders of the claims handler.

Administration and Compliance - Accelerate laborious administrative tasks, and ask questions of datasets to speed up notoriously complex regulatory compliance procedures. By applying AI to fundamental ‘back-end’ insurance processes, efficiency can be improved, operational costs reduced, and more resources dedicated to fixing the inherent issues of a broken insurance model.

Key Insurtech Solutions we are piloting include;

DataCubese D3 Core is a subscription-based Software-as-a-service platform hosted on Amazon AWS. D3 Core improves underwriting workflow by providing a single platform for document intake, enrichment and quote generation. This solution will significantly increase the efficiency of reviewing deals by underwriting which allows an underwriter to focus on the deals that they want and increases the throughput of each underwriter and the amount of premium that they can write.

Pillar Technologies is a real-time risk management platform for general contractors. It helps its users predict and prevent damages. Through the use of on-site sensors, the company monitors for destructive environmental conditions such as fire outbreaks, high humidity exposure, and mold growth. This opportunity provides an IoT Sensor that detects up to 12 losses including water leaks, fires, pipe bursts. Will offer to insureds on vacant buildings with premium discounts. An Insured/Carrier would receive text notification about loss instantly. The potential for litigation play as it is very difficult to prove certain losses in court (temperature maintenance, etc.).

Kyron Robotics solution we are piloting in our finance department to drive operational efficiencies, reducing unnecessary costs and freeing up staff to focus on value-adding financial activities. Robotic Process Automation (RPA) is a critical puzzle piece for any organization looking to modernize inefficient legacy processes.

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