Rigid internal structures prevent insurers embracing technology

Rigid internal structures are the biggest obstacle preventing insurers from embracing new data analytics systems, according to Todd Rissel, CEO of e2Value.

Speaking at Intelligent InsurTECH Europe 2019 in London on October 14, in a session called ‘Connect The New Data World To The Old World Of Underwriting’, Rissel said people and systems can both be resistant to change. But once these obstacles are overcome, applying enhanced data analytics can considerably improve profitability, on both old and new books of business, he said.

e2Value provides data that Willis Towers Watson then converts into a ‘structured  insurance score’, allowing insurers to compare different risks, in much the same way that a credit score allows lenders to compare different borrowers.

This allows insurers to look at different types of property and more accurately predict how each of them will react when subjected to fire, weather or water damage, for example. “We want to turn the view of risk from being value-centric to being peril-centric,” said Rissel.

He said the insurance industry is increasingly embracing the new opportunities presented by technology. “Two years ago I used to give this presentation and I talked about something that was going to happen,” he said. “Now I talk about it as something that is happening. Our offering is accepted in 26 states in the US.”

e2Value has 20 years’ worth of data, from nearly 500 clients, giving it a comprehensive database of losses. This equates to four million loss years and risks, said Rissel.

On average there is a 2 percent discrepancy between a customer’s expectations and the final cost of damage, he said.

Rissel noted that fierce competition among insurers for low-risk properties mean margins are paper-thin for such business, reducing the opportunities for profit. Enabling insurers to better price higher risk properties, for example those near oceans or close to areas susceptible to wildfires, increases their opportunity to write profitable business, he said.

Most providers earn 3 percent of their premiums on business generating 40 percent of their loss ratio, said Rissel.

He added: “To differentiate themselves from their competitors, insurers need to take risks that others do not want to take.”

Even a small increase in risk tolerance can translate to a significant increase in premiums collected over the long term, he noted.