Underwriters: create competitive advantage with advanced data & analytics

by Bret Stone on February 22, 2018

At a glance:

  • New external data sources are enabling underwriters to better understand potential risk and create opportunity.
  • Insurers can improve combined ratios by 16-21 points using insurance analytics to more accurately assess risk in property underwriting.
  • Underwriters need to leverage innovations in data and analytics to build healthier portfolios and differentiate in the market, which means adapting their systems to keep pace with the latest science and technology.

As an underwriter, you’re already data driven. But, how data informed are you? To effectively compete, insurers—and underwriters in particular—will need new and innovative sources of external data, alongside advanced analytics, to inform underwriting strategy and put that strategy into practice at the point of sale.  

So what do we mean by “external data”? For the purposes of this article, external data (aka “expert” or “third-party” data) isn’t just any data P&C insurers may leverage outside of their organization, but specifically, hazard and event data from expert modelers and data providers, such as JBA, KatRisk, Swiss Re, and many more. These external data sources are enabling a new level of accuracy in risk assessment, helping underwriters identify and create opportunity. As Sharad Sachdev, Managing Director and Analytics Lead at Accenture, noted, “The game has recently changed... and the pace of change is rapid. Insurers are finding that they must creatively explore, mine and harness external data to remain competitive, to convert new opportunities for growth and to achieve improvements in the loss ratio.”

In fact, according to Accenture research, “Insurers can increase profitability between 16 and 21 combined ratio points by using analytics to more precisely measure risk in underwriting; to anticipate and prevent losses with real-time monitoring; and to increase sales via more targeted distribution strategies. Insurers that are unwilling or slow to act, however, will be unable to identify and pursue the best risks because they simply will not know where to look.”

insurance profit captured by analytic leadersAccenture, “External Data is Changing Everything for Insurers”


A new world of external data choice

So, what does it mean to “creatively explore, mine and harness external data to remain competitive”? It means choice, along with the ability to readily access and contextualize value-added data. Let’s break this down some more, starting with choice.

You already use data from public sources, legacy providers, and in-house systems to improve data quality and understand relative risk. This is not new. But, are you using (or do you have the freedom to choose) the best expert data sources? Data providers are continually enhancing their data based on research—more accuracy, better science, higher resolution (think about the advantages of accessing flood data beyond FEMA, for example). Next generation data providers are leveraging the latest scientific methods to help insurers quantify and assess risk with more precision, including providers like Ambiental, HazardHub, JBA, KatRisk, Location, Inc., and RedZone, just to name a few. But while more choice exists, too many insurers are still hindered by legacy underwriting systems. To effectively compete, increase premium volume, and reduce costs, underwriters need to capitalize on data innovations quickly, and that means having the technology in place to do so. Choice of external data is critical, and data is without doubt key to underwriting profitability—but only to the extent that you can integrate it and exploit it.

Data access and contextualization

While it’s a new world of data choice and abundance, it’s a whole new playing field when it comes to underwriting platforms that can provide swift data access and robust contextualization. You may have a plethora of data, but are you making productive use of it for the most informed underwriting decisions? It’s one thing to be in possession of data, and yet another to be able to realize its full value.

Many insurers are still limited in their ability to readily access and exploit external data due to legacy systems or constraints that prevent them from harnessing its potential value. To keep pace, underwriting platforms need to support complex, and often high-resolution, hazard data from different expert content providers, delivering data in multiple formats. All of this can be a strain on in-house resources and limited by lack of technical expertise. That’s where the value of an underwriting solution like SpatialKey comes in, connecting insurers to an ecosystem of expert hazard and event data providers—without the need for insurers to build their own solution or procure relationships with data providers themselves. Instead, underwriters gain efficiencies by automating parts of information capture. They can pick and choose the external data they need, when and where they need it, for the peril or region they’re underwriting. And, on the same underwriting platform, they can contextualize that data through innovative geospatial analytics and location-based intelligence.

With 2017 global insured losses estimated at $136 billion (more than double 2016), there’s a renewed focus on data and analytics as catalyst for more refined underwriting. It’s clear the traditional underwriting process “was designed for a world of information scarcity” that no longer meets the requirements of the new world of insurance. Underwriting solutions must support information abundance as insurers look to exploit better data with agility and speed. Can your current systems keep pace with the latest innovations? The underwriting community faces many challenges today, but those that embrace innovations in data, analytics and technology, are seeing results.

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Topics: property underwriting, hazard data

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