For those that have started to embrace digitalisation – what’s the next step? In this blog, we discuss the benefits of optimising data and Machine Learning for the future of marine insurance risk modelling.
This article was originally published in the 2019 September issue of the IUMI Eye Newsletter.
After years of rising loss ratios and falling profits, there’s a sense of urgency in the marine insurance market to find a way to better understand risk. The Internet of Things (IoT) and Machine Learning (ML) offer the ability to more accurately assess both current and future risk. Despite this, caution around traditional ‘black box’ telematics has driven scepticism over the science behind such solutions. Results from implementing IoT and ML must therefore be transparent, allowing underwriters to clearly understand risk scores and the contributory factors and apply critical thinking.
Calculating existing and predicting future risk
Static rating factors used in calculating risk don’t account for behavioural and environmental variables. This is significant as both behaviour and environment have a much greater bearing on risk profile. Whilst raw behavioural data is available, it’s not straightforward for the industry to interpret and apply.
Using ML, big data platforms can combine vast behavioural datasets with an insurer’s claims information to produce a risk score for their clients. Algorithms process hundreds of thousands of behavioural factors quickly to find trends and predict future loss values. Importantly, the platform can present information in simple terms so underwriters can benchmark clients against the rest of the market and understand the impact of new deals on their portfolio.
Technology to enhance, not replace
Underwriters that combine their expertise with insights generated by big data platforms will transform the marine insurance industry. Transparent insight and critical thinking will lead to more profitable business through better risk selection and competitive pricing. The same information could allow Brokers to streamline risk placement, as well as offer new revenue generating consultancy services such as active risk management and claims prevention.
Data and ML present exciting opportunities for the future, enabling a blend of rich expertise and new technology that will change marine insurance for the better.
Click here to learn more about risk modelling for marine insurance.
