A volatile insurance marketplace can exacerbate the problem of hasty or compromised data. (Illustration: Valery Kachaev/studiostoks/Adobe Stock)
Although insurance markets are stable and predictable, their susceptibility to disruptive variables cannot be ignored.
The insurance industry is actively seeking to establish reliability in the face of such variables as inflation, escalating interest rates, economic downturn, regulatory intervention and the waning impacts of the COVID-19 pandemic. These conditions are seeding concerns about the strength and sustainability of the market.
As it stands, the current insurance marketplace reveals a lack of preparedness to effectively navigate through an unstable environment. As excesses occur and the market hardens, rational insurers act to make money or avoid losing it, thereby moving business back toward equilibrium.
As it has in the past, the insurance market will adapt to these changing market conditions, but we will likely see greater technology-driven experimentation and risk-taking as insurers strive to drive competitive differentiation and profitable growth.
However, compared to previous economic-recovery periods, information and the data it depends on will determine winners and losers. Nevertheless, the emergence of advanced technologies offers potential solutions to mitigate the challenges that may arise in the marketplace when dealing directly with trustworthy data, thereby enhancing its resilience to withstand such conditions.
Uncertain data leads to an uncertain market.
The occurrence of data inaccuracies in reporting is universally met with disdain. It is a frequent scenario where details pertaining to renewed insurance programs need to be furnished, only to realize later those spreadsheet formulas were flawed after crucial actions have been made based on such data.
Identifying and remediating incorrect data has typically been a manual process, and the ramifications have been minimized over time. There are various reasons why wrong information can creep into an organization at any point: Unclear instructions and expectations, poor listening skills, unreliable data, lack of collaboration among team members, to name a few. Moreover, the inclusion of a volatile insurance marketplace can exacerbate the problem of hasty or compromised data.
In this age of outsourcing, one of the leading issues for insurers involves teams, departments and vendors operating in silos and not sharing data. This lack of collaboration can kill a business. As Gartner has shown, the financial impact of poor data is $12.9 million per year.
Amidst an unstable marketplace, stakeholders grappling with such issues are constantly exploring viable solutions. Access to infallible and reliable data has the potential to offer significant relief in such circumstances.
Is your data accurate and trustworthy?
Although the accuracy of data has historically taken precedence, the issue of trust in such data is frequently disregarded. In the past, it was acceptable for insurers to convey important information to members of the audit committee without citing data sources.
However, inquiries about the reliability of data sources have now become commonplace. This line of questioning has become more scrupulous as the data source is now not always internal, where data quality (DQ) can be controlled and maintained immediately. The data assets are acquired from external sources where the DQ rules, authorship, and levels of governance are often unknown.
With the increasing adoption of the cloud and new technologies focused on augmentation and automation, the complexity of the data ecosystem is deepening. Rather than considering key enterprise data as absolute, firms must also consider its origin, jurisdiction and governance — and therefore the degree to which it can be used in decision-making. The ability to navigate periods of market uncertainty successfully necessitates access to precise and dependable data.
Acquiring trustworthy data
Risk managers balance insurer relationships, oversee comprehensive insurance and risk programs, and identify risks that could hinder an organization's reputation, safety or financial success. Accurate and trustworthy data is crucial in this process. With this increasing age of data complexity, one can obtain a comprehensive view of an organization's risk profile. By collecting, organizing, and analyzing data from multiple sources, risk managers can identify potential threats, assess their potential impact and develop strategies to mitigate risk.
Simultaneously, a risk manager can track multiple insurance policies, policy details, coverage limits, deductibles and premiums, and monitor claim activity, settlement amounts and reserve balances. Additionally, the risk manager can leverage data analytics and business intelligence tools to identify trends, track key performance metrics and optimize insurance programs and risk mitigation strategies theoretically in real time. These technologies can help them identify areas of potential cost savings and negotiate more favorable rates with insurers and other risk partners.
For example, by analyzing internal and external claims data, risk managers can identify areas where claims frequency and severity are high and mitigate those risks, such as improving safety protocols or implementing new loss control measures. In addition, new data sources can help risk managers track performance over time, identify emerging risks and adjust their strategies accordingly. Yet, to benefit from this data-driven information, one must ensure that the data is accurate, complete, and used consistently and effectively.
Staying ahead, steadying the market
Historically, a risk manager's subjective assessment played a crucial role in determining the valuation of an entity. Now, a company's worth is predominantly influenced by the quality of its data. In the ever-evolving insurance market, characterized by the constant risk of substantial expenses and an unpredictable future, establishing the credibility and reliability of an organization's data is imperative to remain competitive.
As newer technological capabilities become increasingly widespread, it is crucial for companies to differentiate themselves in terms of their competitive advantage. Insurance providers that can sustain a commitment to transformative change while keeping pace with accelerated growth will be better positioned to outperform legacy carriers that may be slower to adapt.
Jeffrey Sharer is vice president of customer and product experience at LineSlip Solutions. He has more than 20 years of insurance experience as an underwriter, broker and risk manager. As the industry has digitized, Jeff has focused his work on transforming risk information management to make better risk decisions.
Opinions expressed in this article are the author's own.
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