As reinsurance brokers roll out computerized catastrophe management tools to their insurer clients, unexpected side benefits are emerging, allowing carriers to dream up applications that extend well beyond making decisions about reinsurance–such as tracking agent profitability and mobilizing claims adjusters.
The new tools were essentially designed to allow insurers to see the locations of the risks they write plotted on maps, and to analyze geographic accumulations and proximities to catastrophic hazards and terrorism targets, according to developers at two separate reinsurance brokers.
But there are hidden benefits of these tools to unleash the untapped powers of the underlying data that gets put into the models, according to both Frank Pierson, senior vice president and chief technical officer for Holborn in New York, and Lara Mowery, a managing director for Guy Carpenter based in Minneapolis, who separately demonstrated their wares to NU earlier this year.
Data inputs can include policy-specific information like names, addresses, premiums, lines of business, deductibles and insured values that are routinely–and blindly–turned over to reinsurance brokers to feed into catastrophe models for reinsurance and rating agency analysis, as well as other tidbits that have previously unrecognized potential to better inform a host of strategic and operational decisions.
Mr. Pierson, who demonstrated Holborn's "Eye In The Sky," and Ms. Mowery, who walked through the mechanics of Guy Carpenter's "i-aXs," each touched upon some revelations their tools can provide for agency-based insurers, when these companies provide the reinsurance brokers with information identifying the agent that produced each policy.
"The insurer can start looking at what kind of modeled catastrophe loss ratio each of its agents is producing," Ms. Mowery said. Additionally, the insurer might ask, "What sort of geographic spread do my top five or 10 agents have?"
Mr. Pierson noted that an insurer also might realize that a specific agent is growing, but only because they are writing all along the coast, prompting the insurer's action to cut that agent down.
A built-in feature of Holborn's Eye In The Sky allows its users to get census data for a particular county, Mr. Pierson said, demonstrating the feature with a mouse click producing a pop-up box to reveal the number of people in one Minnesota county, along with the number of homes, their ages and other demographic information.
By overlaying information about agency locations or market representatives' offices, homeowners insurers can identify areas of market potential–where they may want to grow but perhaps don't have very good agency penetration, he said.
According to Ms. Lowery, "as you start to think through the business applications" of the new tools, they become "much broader than just where are my risks and how are they contributing to what reinsurers see."
The uses of these tools "become much more about internally managing your business, making decisions about what kind of new books of business you want to take on, or how you want to expand geographically–doing it smartly and with the right review of information," she said, adding that insurers can now get at their own information more easily than in the past.
"Clients can get this information from anywhere in the world where they can get to the Internet," Mr. Pierson added, noting that this worldwide access, coupled with ever-evolving enhancements to put real-time weather information into the new online tools, can allow high-level executives to mobilize forces to respond to an event even before damage occurs.
For example, at the time of the demonstration in late January, he reported that Eye In The Sky would be adding real-time information about storm tracks in advance of the hurricane season. So, if a storm is reported to be heading for the United States coast where XYZ Mutual has written policies, even if the CEO is in London looking to place a reinsurance program, he can log in and see where it's going.
"Then he can either say, 'I've got to get my claims adjusters ready because this is going to hit us,'" or breathe a sigh of relief knowing the storm will likely bypass areas where the company has written policies, he explained.
Live data incorporated in Eye In The Sky gives clients information to make better decisions as events happen, he said. They're not just managing catastrophe exposures they take on at the policy-writing stage, or those they retain through reinsurance decisions. "Now that they have the exposures on their books, they're managing their responses," he said.
Mr. Pierson sees one of the biggest side benefits of his Eye In The Sky tool in its ability to get insurers to simply pay more attention to the quality of data they gather.
Some clients have recognized that poor data quality was one cause of the poor performance of catastrophe models in recent years, and "they're sometimes convinced to spend the money to improve their data just to get a better cat model result," he said.
Holborn hopes that tools like Eye In The Sky–by demonstrating value to inform business decisions beyond the ability to analyze catastrophe risk accumulations–will give another boost to data quality.
Mr. Pierson recalled how an enlightened executive embraced the concept during a product demo earlier this year. As Mr. Pierson revealed some of the product's typical displays of colored dots on a map representing individual policy locations for each of the insurer's policies, the executive questioned why there were only a few dots appearing to illustrate many, many auto and homeowners risks in a particular region.
The client had only provided ZIP code data, Mr. Pierson reported, explaining that, as a result, the tool's visual representation of policies on a map–a series of layered dots–had many policy locations piled up on a single ZIP code point. "Two weeks later we got a new database with all the street addresses," allowing Eye In The Sky to convert that one big dot into dispersed policy locations, he noted.
"We're expecting that as clients start using this product, their data quality is actually going to start going up," he said.
In the past, what a lot of companies did was turn their data over to their reinsurance brokers, allowing the brokers to run catastrophe models for them. If they needed anything else, or if the rating agencies requested more information, they would run back to their brokers.
"Instead of doing that" now, Mr. Pierson said that with tools like Eye In The Sky, "they can just start going in and looking at the data themselves, and they can't say, 'Well, I can't do it because it's too hard to get into our data.'"
At broker Guy Carpenter, Ms. Mowery, leader of the team that developed i-aXs, lists "enhanced data access" as a key benefit of the tool. In fact, the name–i-aXs–is a shorthand reference to the term "information access," she explained.
She said that when she walks clients through how i-aXs functions for the first time, "I've had a few cases where I've had them say, 'You know, it would be great if we could see our own information.'"
Executives, in particular, are astonished when told that what they are seeing– depicted on a map or in by-region reports of total insured values, for example–is in fact their own policy information.
The data sets necessary to run catastrophe models are enormous, she said, noting that as companies attempt to capture more information and to analyze it more frequently, the process of organizing the data for analysis becomes "very unwieldy."
One of the goals of i-aXs was making it easy for clients to summarize their information in pre-developed reports–reports that can be instantly repopulated every time new data is uploaded, she said.
(Details of the models revealed during demonstrations for NU this year are presented in the accompanying article, linked below.)
Holborn and Guy Carpenter offer Eye In The Sky and i-aXs free of charge to clients that use their brokerage services to place property-catastrophe reinsurance programs.
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