Historically, 80% of the information needed to make an underwriting decision has been generated internally and 20% externally. Moving forward, this will switch. With ever-growing datasets being made available, it’s beyond the capability of individuals to collate, assess and understand this information – we need algorithmic help.
After years of rising loss ratios and falling profits, there’s a sense of urgency in the marine insurance market to find a way to better understand risk. However, the early ‘black boxes’ were clumsy in their approach which has driven scepticism over the science behind such solutions. Results from implementing the Internet of Things (IoT), Artificial Intelligence (AI) and Machine Learning (ML) must therefore be transparent, allowing underwriters to clearly understand risk scores and contributory factors, and overlay critical thinking.
Calculating existing and predicting future risk
Static rating factors used in calculating risk don’t account for behavioural and environmental variables. This is significant as both behaviour and the environment have a much greater bearing on risk profile.
Using AI and ML, big data platforms can combine vast behavioural datasets with an insurer’s claims information to produce a risk score. Algorithms process hundreds of thousands of behavioural factors quickly to identify trends and predict future loss values. Importantly, data platforms can present information simply so that underwriters can benchmark clients against the rest of the market and understand the impact of new deals on their portfolio.
Technology to enhance, not replace
Underwriters that combine their expertise with insights generated by big data platforms will transform their industry. Transparent insight and critical thinking will improve profitability through better risk selection and competitive pricing. The same information could allow brokers to streamline risk placement, and offer new revenue generating consultancy services such as active risk management and claims prevention.
Data, AI and ML present exciting opportunities for the future, enabling a blend of rich expertise and new technology that will change marine insurance for the better.
Learn more about predictive pricing for marine insurance HERE.