Insurtech to lift Lloyd’s commercial lines to next level

Commercial insurance arguably requires a more tailored approach to clients than personal lines, but that should not prevent insurtech from offering a new approach to tackle risks in this segment.

“We believe insurtech can help improve commercial insurance,” Maynard says.

There are areas where technology can be both automated and tailored, he explains. “You can imagine a system that incorporates multiple data feeds from a client and uses them to offer automatically generated, tailored solutions,” he said.

He pointed to cyber insurance where insurtech firms use cutting-edge techniques, military intelligence techniques, data feeds from all sorts of sources, and mash them together in clever ways in order to allow insights into all the risks and also the potential aggregations of risk across a portfolio.

Lloyd's creates a lab

In order to take advantage of the opportunities that new technology offers, Lloyd’s has partnered with innovation specialist in the insurtech sector L Marks as well as the Boston Consulting Group (BCG) to set up and operate an innovation lab within the market.

The Lloyd’s Lab is set to officially launch in September 2018 and will focus on designing technology-driven solutions to meet the challenges the Lloyd’s market currently faces.

The lab will enable new concepts and ideas to be tested in a fast-track, fast-fail environment with the support and active involvement of Lloyd’s market participants.

“Having insurtech companies inside the Lloyd’s building will enable them to have first-hand access to the companies they are going to be working with in the future,” Maynard said.

The Lloyd’s lab will be organised around a set of themes covering Lloyd’s specific questions. L-Marks will scout globally to select insurtechs to work in London for a period of about ten weeks, Maynard explains. At the end of this period the insurtech firms will be able to demonstrate what the technology can offer Lloyd’s and. As a next step, the Lloyd’s market may decide to invest in the companies or license the products.

What insurtech can do

The challenges that insurtech may address for Lloyd’s could be around methodologies to take advantage of new forms of data to assess risk, Maynard suggests.

The data may come from the internet of things, the broader internet or from specialised organisations like meteorological offices that have aggregated terabytes of data on climate risk, he says. Such data may allow for a better understanding of flood risk and hurricane risk around the world, Maynard explains. Also, indices could be developed which can serve as a proxy for risks.

“We’ve looked at various options in the past. One example is a climate index that is indicative of the potential for a drought, and which could offer a trigger for a contract,” Maynard said.

While admitting that such products already exist, Maynard noted that the number of data sources is growing rapidly and that the techniques need to be assessed regularly to extract value of the expanding data sources for example to refine the forecast capabilities.

Insurtech can help commercial lines to better understand risks and enable the use of new data sources, Maynard says. “There are many new tools out there for extracting insight from data,” he adds. The amount of data available is set to grow further as the internet of things provides increasing numbers of data feeds.

“We are going to need whole new suites of tools to take that data, analyse it, to generate insight and then find a way to enable us to differentiate our product-offering to customers, based on that data,” Maynard says.

New data sources may allow a better differentiation between clients, Maynard notes. “Maybe you can tell one client has a particularly good risk management framework in place through the kinds of data feeds that you can analyse and that would enable you to offer them a better price,” he says.

In portfolio management, instead of assessing just single contracts one at a time, technology may enable an assessment across a whole book of contracts that has been written, making sure that the firm is not being exposed to unwanted aggregations of risk and systemic risks.

Reducing the protection gap

In addition, insurtech may be able to expand the reach of the Lloyd’s market and reduce the global protection gap. “Technology enables you to reach people in different parts of the world,” Maynard says.

He pointed to Haiti where an earthquake hit with almost none of the damage covered by insurance as opposed to richer regions like North America, where the protection gap is significantly lower.

“Insurtech can help reach those markets - through parametric triggers and smart contracts, for example. It could cut costs and deliver immediate claims payments, so the money gets very quickly to the right place after a disaster,” Maynard said.

Another area where insurtech can offer new solution is around operational efficiency such as the use of chatbots, Maynard notes. “We are running a pilot at Lloyd’s where we are using an artificial intelligence engine to help with regulatory queries,” he explains.

AI technology can, for example, assist the Lloyd's International Trading Advice (LITA) to answer questions from the Lloyd’s market. At the moment, AI is supporting staff by searching documents and bringing it back in the form of a google query to answer questions such as if the market is authorised to write risk in a certain territory or what the tax law is in a particular region, speeding up the process.

In future the AI engine may be able to answer questions autonomously, Maynard suggests. “If you can get those efficiencies across the board you can really start to add value and augment people’s capabilities,” he says.

Another area where insurtech firms may be able to assist commercial underwriting is in the claims area, Maynard says. “We want to make the claims process as slick as possible,” he notes.

Lloyd’s wants to take advantage of technologies for using satellite imagery or drone imagery to help adjust claims. “Maybe we will get to a point where artificial intelligence can automatically pay any claim arising from flood damage. It could assess the damage without human input,” he suggests. After catastrophes hit, loss adjusters often struggle to reach the area. “If you could use automatic loss adjusting, you could speed up that process,” Maynard said.