How Predictive Pricing Can Enhance Marine Insurance Market Performance

By Joseph Artgole, Marketing Manager, Concirrus, IUMI Professional Partner,

Digitisation is one of the most influential transformations taking place within insurance today. Big data analytics and insight platforms allow for the interpretation of vast data sets, uncovering real-time behavioural trends. Such insight is now being applied to predictive pricing in marine insurance, improving the overall capability and understanding of risk across the value chain. Estimated loss valuations become more accurate whilst the biggest contributors to losses can be identified. This allows for further differentiation within a highly competitive marketplace.

With an expected loss valuation and risk score, insurance brokers can understand an underwriters’ view of their accounts. It ensures they’re informed and can set a walk away price in advance of negotiations. If a score is adverse, brokers can identify which factors need improving at both account and vessel level. Brokers can then consult clients on where to direct investment to reduce risk. Success reinforces relationships, improving client and market relations.

Today, actuaries typically create risk models manually. With the increasing volume and frequency of data received, manual processes aren’t sustainable in delivering insight on time. Machine learning models allow actuaries to benefit from the automated interpretation of vast datasets. Actuaries can combine their expertise with an understanding of influential factors that affect loss valuation to best advise underwriters.

Risk scoring allows insurers to better understand the level of risk they’re considering. An expected loss valuation ensures they can more accurately price premiums. An expected loss can also be used to calculate the effect of writing business on the portfolio. Doing so shows the impact of a decision on portfolio performance before it’s made. Head underwriters can set a threshold for a team based on risk score to help stabilise book health. Underwriters can use a vessel score and influential factors to augment policies and minimise exposure.

With improved performance throughout the value chain, loss ratios will become more stable and immediate rewards will be seen on the capital side. This makes the insurance industry more attractive for investment and encourages growth within the market.

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