Re/insurance companies who are slow to adopt the numerous benefits offered by new and emerging technologies are likely to be supplanted by more enterprising firms, according to James Lay, Commercial Director of Insurance Business at Simplitium, a financial services solutions provider.
Speaking with Reinsurance News, Lay noted that re/insurers have generally been more reluctant to embrace technology than the rest of the Financial Services industry, with many companies still relying on static legacy systems, particularly for catastrophe risk modelling.
However, despite this conservatism, the industry is beginning to take steps to better integrate technology, with new platforms like ModEx streamlining the catastrophe modelling process, and initiatives like Lloyd’s proposed electronic placement mandate pushing re/insurers to go digital.
Lay commended these initiatives, saying: “The industry does need to be forward looking – and laggards will likely find themselves supplanted by other companies adopting new technologies and becoming more efficient, more effective, and able to access new markets. Identifying and embracing emerging technologies will prove to be crucial in the future of the industry.”
The re/insurance industry has for some time now been braced for the radical disruption that new technologies have promised to bring through improvements to efficiency and data analysis, the accuracy of risk assessments, and the establishment of new markets.
In terms of risk modelling, Lay pointed to innovative examples like Ticinum Aerospace and Insurdata, which use machine learning capabilities to analyse street view imagery and other data sources to capture additional building attributes.
He explained: “New techniques are enabling us to capture exposure data at a granularity and scale that we have never been able to before … Enhanced computing power together with better land height data enables companies to be able to produce hazard maps at a resolution that was unthinkable a few years ago.”
Simplitium’s ModEx catastrophe modelling platform, which operates on the open-source Oasis Loss Modelling Framework (LMF), is another example of the innovative use of technology, and aims to reimagine the way risk models are brought to market by model vendors, as well as how they are accessed and used by re/insurers.
“By making it easier for firms to access and use advanced models without the significant costs and resource requirements traditionally associated with catastrophe risk modelling, the platform is lowering the barriers to entry for model developers,” said Lay.
“This provides increased choice to the market and broadens market participation. All this should result in more (re)insurers using a wider variety of models from more providers.”
Lay added that, going forward, the adoption of emerging technologies such as artificial intelligence (AI) and machine learning are also likely to play an increasingly critical role in risk modelling, and noted that these capabilities are already being used to refine location data for property re/insurers.
Other signs of the industry changing its attitude to technology include the move from established consultancies to smaller start-up companies, the rebranding of actuarial and statistical teams to ‘data science’, and the emergence of new tech-focused departments and roles within companies.
“The rise of new technology is beginning to challenge the status quo, changing the global landscape by offering new and innovative ways of doing things,” said Lay. “We are getting to a point now where most firms realise the need to embrace technology, or risk being left behind.”