Insurtech, Bermuda and creating the underwriter of the future

Technological innovation is quickly becoming a core part of the re/insurance industry’s future. As more incumbents begin to invest heavily in innovation as a competitive necessity, and more startups eye the industry as ripe for disruption, technology is set to become the biggest differentiating factor in a firm’s success in the coming decades.

At the top of the wish list of technological innovation is underwriting and risk assessment, using new platforms and the industry’s unprecedented ability to analyse its vast data to more accurately identify, price and manage risk.

But will technology alone be enough to handle the complex risks that form the bread and butter of the global re/insurance industry?

Speaking on a panel at the Bermuda Business Development Agency’s Virtual Tech Summit 2021 in October representatives from some of the Island’s biggest companies and most exciting startups gathered to discuss what the underwriter of the future will look like.

The doomsayers in some quarters have frequently predicted insurance underwriting as one of the professions most susceptible to automation by artificial intelligence (AI).

However, as insurtech has become an integrated part of the global insurance machinery, human underwriters remain as important as ever to the day-to-day operations of firms, and despite the abundance of data and platforms available they still play a key role in assessing and taking on risk.

Abhijeet Kuray, chief technology officer of Mosaic, the specialty carrier and owner of Lloyd’s of London Syndicate 1609 alongside wholly-owned capital management agencies in Bermuda and elsewhere, said that while Mosaic is a technology-led company, the underwriter retains an important role.

“It’s a fair mix of underwriting talent and technology. We do see the underwriter as a crucial role. In our recruiting, you’ll see that we have been focused on getting the right underwriting talent included as well,” Kuray said.

“It depends on the business model. Depending on the lines we write as well as the lead positions we are taking, there are pricing and actuarial decisions that are inherent to Mosaic, and that is part of our secret sauce.

“Our operating model comes together with digital and the underwriter as one course.”

A competitive advantage

Adrian Jones, managing director of HSCM Capital Management, added that while the human element of risk assessment remained important, underwriters working alongside algorithms which can more quickly assess risk provide a competitive advantage.

Underwriters are now individuals who could work alongside data scientists to create models that allow for quicker and more accurate quoting of risk, helping to add value for all involved in the chain, he said.

“If you can quote something quickly and accurately with only a handful of questions, and you can do that via a screen, then you have an inherent advantage in dealing with customers compared to folks who are slower, who require more manual processes, etc—provided that your loss ratio is not significantly higher,” he said.

“That is one of the challenges that some companies have experienced, but others have done very well in that regard. Some companies are finding that the algorithmically-driven individual risk underwriting for smaller risks is more effective than if it’s done by humans.

“There are no longer armies of relatively poorly paid people going through papers all day, every day, and making decisions on risk. It’s becoming much more sophisticated. That’s ultimately good for everybody involved, including employees, customers and intermediaries,” Jones said.

New blood

Bermuda has seen a deluge of new startups this year, many of which are offering some form of proprietary technology.

Given the Island’s reputation as a hub of re/insurance innovation, it is no surprise that many of these new companies have chosen to domicile there, and Fred Kipperman, managing director of AI-powered risk data platform Archipelago, says it is this forward-thinking element that encourages a tech-friendly environment.

“One part of the appeal of Bermuda is its forward-looking perspective,” he said. “We’ve all been talking about the importance of data, its role and modelling. But we’re living in a world where what’s happened previously, and what’s been documented, is less relevant to the underwriter of the future because the world’s changing so fast.

“We’re harnessing knowledge and insights in such a new way that the perspective of being open to forward-looking insights into underwriting is another part of what makes Bermuda unique.”

Kuray agreed, saying that the openness of companies to collaborate and share knowledge within the ecosystem is what sets Bermuda apart from other hubs of the re/insurance world.

“Everything is accessible in Bermuda. The partnerships we seek to make, whether on the capital, the technology, or the reinsurance side,” he said.

“That is the value we see in Bermuda. We were over there for some board meetings, and within a couple of days, we had already established so many contacts, just because everybody in that ecosystem is around and accessible,” he concluded.