The first 2023 Spring Meeting General Session, “State of the Insurance Market,” discussed the current market, including social inflation, CAT losses, cyber insurance and concerns around third-party litigation funding. Continuing this journey, the fourth general session explored “The Future of Insurance.”
Moderated by Randel Bennett, VP of strategic partnerships for Swiss Re, the session included panelists Kate Crespo, managing director of FT Partners; Andrew Johnston, global head of insurtech for Gallagher Re; and Bryan Falchuk, CEO of PLRB.
The panel embarked on the discussion around data, the use of data, digital frameworks and healthy “disruption” with technology as actuaries progress into “Insurtech 2.0.” The session wrapped up by explaining the importance of partnerships as the key theme for the future of insurance.
Insurance: Understanding big data
Advances in technology have revealed tremendous opportunities for the insurance industry. From a software vendor perspective, Crespo talked about multiple ways insurers are leveraging data analytics and artificial intelligence (AI) today, including building data analytics platforms and data automation. However, what is even more far-reaching nowadays is having access to various types of data sources with new characteristics that are not traditionally used for insurance purposes, such as auto telematics and aerial imagery data. Crespo also discussed social media data from websites and how we could feed those data back into insurers in a digestible way for model and process improvement. New types of data sources and characteristics empower actuaries to work more efficiently.
Following the conversations around data, the panel commented on the use of data; specifically, how to use the data mathematically while maintaining a certain ethical standard.
Ethical considerations around the use of data, especially bias within the data, was one of the hottest topics at the 2023 Spring Meeting.
The panel exchanged their opinions about whether credit scores could truly tell if a risk is a bad one and how they could adversely affect gig workers. They concluded that better understanding the underlying characteristics of risks and avoiding the use of variables as proxies are some things the industry should strive to achieve.
When it comes to collecting the right type of data, Johnston shared that reverse engineering is a useful strategy. Having the problem and hypothesis laid out ahead of time can guide actuaries through the data acquisition process.
Ethical considerations around the use of data, especially bias within the data, was one of the hottest topics at the 2023 Spring Meeting. Instead of treating data bias as a regulatory limitation, Falchuk suggested that the insurance industry engage and collaborate with regulators to address the issue of bias, helping regulators understand the bias and possibly acquiring more equitable and less biased data to use.
Digital framework and healthy “disruption” with technology: Insurtech 2.0
Not surprisingly, all conversations came down to the evolution of digital frameworks and how this has coincided with the evolution of customer needs and expectations. The panel agreed that the industry should remain adaptable and respond to the social changes driven by external forces.
Crespo introduced the terms “Insurtech 1.0” and “Insurtech 2.0” in describing the previous and current stages. She explained that Insurtech 1.0 focused on the consumer business model, targeting customer needs in the front-end and creating modern customer experience. Now, in the Insurtech 2.0 phase, focus has shifted to understanding fundamentals of insurance and solving business-driven problems. Insurtech 2.0 is certainly a more advanced stage, where non-insurance professionals have started to make efforts to improve their understanding of insurance and consider insurance industry needs, as Falchuk pointed out.
Crespo also added that we will continue to see growing partnerships in the Insurtech 2.0 wave similar to the emerging trend observed on the managing general agency (MGA) side, where MGAs partnering with captive reinsurers and are able to turn things around quickly and at lower risk, amongst other advantages.
Although there is a waiting game given the current market condition, the panel agreed that partnership and consolidation will become the future theme. Also, by leveraging collective data from instant and automated information flow across connected nodes/hubs, we will be able to use synchronized data for simultaneous decision making with less frictions and deeper insights. It is only a matter of time before we see this come to light.
Stepping into Insurtech 2.0 — and potentially “Insurtech 5.0” because actuaries are always thinking about the future — we should come together and brace for this exciting and evolutionary change to become better equipped and ready for whatever comes.
Yuhan Zhao, FCAS, is an actuarial manager with Aviva Insurance Company of Canada. She is a member of the AR Working Group and the Monograph Editorial Board. She is also a new Fellow!
