A recent survey conducted by independent research firm Coleman Parkes for pricing decision intelligence leader, hyperexponential, has shed light on the challenges faced by Specialty and Commercial insurers in optimising profitability and making effective pricing decisions.
The poll of 350 underwriters and actuaries exposed significant shortcomings in the industry’s pricing models and technology, hindering the sector from fully harnessing the potential of data for better risk analysis and portfolio decisions.
Despite the abundance of risk datasets due to digitalisation, insurers grapple with data-related issues unique to each country.
In the US, the lack of real-time portfolio visibility is a major concern, while UK insurers struggle with onerous processes and internal compliance. The existing technology falls short in efficiently ingesting and processing large datasets, leaving underwriters and actuaries without the necessary insights to price risk effectively.
Investments in technology have been substantial, but the survey reveals widespread dissatisfaction among underwriters and actuaries regarding the current tools at their disposal. A staggering 83% believe that improvements are needed, and only 19% feel their technology enables data-driven decisions.
A significant factor contributing to this dissatisfaction is the failure of pricing platforms to deliver on their promises. More than half of respondents (56%) reported that their pricing platforms are not meeting expectations, and 45% have yet to see tangible value from recently acquired pricing technology.
Traditional pricing tools are often considered nothing more than glorified spreadsheets, lacking the capability to serve as effective decision engines.
The outdated technology, coupled with time-consuming admin tasks, has a direct impact on business efficiency. On average, underwriters spend three hours each day on data entry, while actuaries take an average of 192 days (for US actuaries) and 150 days (for UK actuaries) to release new pricing models.
Such lengthy processes hinder insurers from adapting swiftly to the rapidly evolving risk landscape, affecting their ability to make timely and profitable decisions.
Tom Chamberlain, VP Customer and Consulting at hyperexponential, pointed out that pricing decisions are critical levers for insurers’ profit and loss, but few have achieved meaningful transformation in this area.
He emphasised that modern insurers have access to a wealth of innovative data sources, including IoT, drones, social media, dash cams, and wearable technology like smartwatches.
However, to leverage this data effectively, insurers need to adopt pricing decision intelligence (PDI), which fosters an iterative feedback loop between data, insights, and decisions. Embracing modern pricing technology and processes will be the key to success for the next generation of Specialty and Commercial insurers, Chamberlain said.
