Marine analytics 'could help underwriters get their bonuses'
The use of big data and behavioural analytics “could help marine underwriters get their bonuses”, Concirrus CEO Andrew Yeoman has said.
Speaking to The Insurance Insider, the marine analytics executive said the use of artificial intelligence and behaviour pattern analysis could help underwriters return books of business back to profitability by pricing risk more accurately.
However, some marine underwriters speaking to this publication said they had yet to be fully convinced of the technology’s value.
Yeoman said recent analysis of client portfolios carried out by Concirrus had pushed underwriters to change their pricing, which in some cases resulted in an increase in rates.
“The current pricing models very often mis-price the risk. In some cases it is overpriced, but in the majority of cases we see that the risk is underpriced,” he said.
The executive’s comments reiterate a call from Windward CEO Ami Daniel for senior managers at marine insurers to take a “leap of faith” and embrace analytics if they are to price risk more accurately.
“We are aware and sensitive to the fact that combined ratios are challenging. But if you don’t invest in the technology, you won’t get the returns,” Daniel said.
The role of analytics comes under scrutiny as the marine market continues to struggle with anaemic rates and a declining premium pot.
Most non-loss hit accounts outside the sub-classes of cargo and Gulf of Mexico wind renewed flat or registered a low-single-digit uptick at the 1 January and 1 April renewals. In its 2017 full-year results, Lloyd’s reported a combined ratio of 122.4 percent across marine business.
Analytics firms say more granular data will help underwriters demonstrate more clearly to clients where risk is incorrectly priced.
However, most marine underwriters canvassed by The Insurance Insider felt the development of machine learning analytics by the likes of Concirrus and Windward was positive for the market but would not solve its immediate woes.
“These new systems are definitely part of a push to price risk more appropriately for us, and we definitely take a positive view of the technology,” one underwriter said.
Another added that better behavioural risk insights would help bring underwriters and senior management to the realisation that they have to pull out of some areas of marine business.
“These systems may allow us to shave one or two points off acquisition costs – which is a great thing – but the market is fundamentally underpricing risk,” he added.
However, a number of underwriters also expressed significant concern over the prospect of AI analytics becoming yet another additional expense for the market.
“We have seen from the Lloyd’s number that there are some syndicates getting it right, and clearly there’s some intellectual property there,” one underwriter said.
Another was insistent that soft information gleaned from clients – such as the state of a shipowners’ office, the number of superintendents employed and the culture of their teams – will always give a more accurate view of a risk than granular behavioural data.
“To get down to the vessel level when you’re assessing a set of shipping risks seems like overkill to me,” the underwriter said.
Concirrus launched the second iteration of its marine insurance platform Quest Marine earlier this month, signing agreements with EY and Finnish software firm Eniram.
Israel-headquartered Windward is a marine data analytics platform that uses AI to create an operational profile for vessels and predict how they are likely to behave in future.
The platform compares 1,500 data points daily to give underwriters and brokers a more sophisticated view of the technical pricing models used to help underwriters assess individual risks.
The company announced last week it had obtained $16.5mn in Series C funding , bringing the total it has raised so far to $38.9mn.
The round was led by XL Catlin’s San Francisco-based InsurTech fund XL Innovate, while existing backers Horizons Ventures and Aleph boosted their investment.
Yeoman’s comments follow a momentous few weeks for the marine market, which has seen a range of syndicates, including Advent and Acappella, withdraw.
AmTrust said in June it would no longer write cargo, hull and marine liability business through Syndicate 1861, while earlier in May, Barbican decided to exit hull and cargo business.