A vast majority (96%) of underwriters and actuaries in Lloyd’s and the London market accept that companies and syndicates face an ‘analytical arms race’ in order to remain competitive, but a significant number (37%) identify this as something for which they are unprepared, a survey conducted by Towers Watson at a seminar on the topic has found.
Delegates at the event in the Old Library at Lloyd’s of London used instant voting technology to answer a series of questions related to the future role of actuarial analytics in the London market. Responses also showed that more than half of attendees (52%) harboured concerns about their planning process, describing it as sub-optimal, lacking analysis of likely outcomes, or implementing management metrics that are unaligned to the analysis.
The same proportion of attendees recognised that more sophisticated modelling would enable a deeper analysis of business drivers leading to improved business performance.
David Ovenden, Director of Underwriting Consultancy at Towers Watson, said: “There is significant pressure on both individual operations and the wider London market. Competition, unprecedented weather, social changes and the availability of large quantities of external data all represent both threats and opportunities. In addition, London market practices are changing due to a technological shift and regulatory pressures driving a heavier reliance on catastrophe and capital models. Increased used of actuarial analysis, and the swift deployment of the insights gained, have become key success factors in this dynamic market. “
He added: “The London market is in for a period of sustained competition where the best prepared person in the room gets the best results. By understanding their data, insurers gain advantage against competition as better analysis makes it easier to spot and exploit market opportunities. The London insurance market remains a people business, but the most effective companies are now looking at a more analytical environment where underwriting brings art and science together.”
Further results from the voting that took place at the event included:
• More than four out of ten attendees (43%) do not currently use claims data to better target their underwriting intervention, audit and survey activity. Just 11% extensively use claims data for this purpose.
• Over half (52%) still use Excel spreadsheets as their default technology for deploying pricing models.
• Excluding data and resources, a lack of underwriter support was found by insurers to be the greatest obstacle to deploying technical pricing in a commercial environment, followed by poor management support (25%).
• 69% either use external data extensively or at least in some lines of business to support their underwriting decisions. Only 12% do not use external data at all.
David Ovenden noted: “Lloyd’s and the London Market lead the world, but what happens next is critical to its future. Relying solely on personal experience is no longer enough, especially in a market where, despite the diverse nature of the risks, data is available to support decisions. Driving insight from data analysis and using that to better plan, price and manage portfolios will deliver sustainable competitive advantage. Sophisticated analytics will not replace traditional London market underwriting, however it will support better decisions and is too valuable a tool to ignore.”
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