Randel Bennett is the Vice President, Strategic Partnerships Manager at Swiss Re, one of the world's leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient. Randel was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio.
Randel, what are your thoughts on the state of ecosystems in the insurance industry, and who has been orchestrating them? How has that influenced innovation?
“Ecosystems are a natural occurrence within the insurance industry, and over the years insurance entities have created them through different partnerships. In early examples, we saw risk-bearing entities find a policy administration system, underwrite data providers, TPAs and third-party claims adjusters, then orchestrate the bunches along the way.
Today, you often see policy administration systems orchestrating ecosystems. With the rise of technology in the insurance vertical, policy administration systems are bringing in different providers and vendors then making guidelines of how to approach the central client. Building out central APIs is something that we're seeing with policy administration systems, so they can have a ‘marketplace’ (very analogous to an app store). Where it was the responsibility of the carrier, we've seen that orchestration happening at the policy admin level. It has continued to evolve and has become a way for other solutions providers to offer their version of an ecosystem. You come in as a central client, and you’ll get access to tools that you wouldn't have had otherwise.”
How have reinsurers played this role in the past, and should they continue?
“In the past, reinsurers have been a step removed from this level of engagement and would typically let the primary carrier work through these ecosystems. Reinsurance was often compared to the person in the ivory tower saying, ‘We'll provide reinsurance and take on the risk-bearing at 60 percent, 80 percent quota share.’
Now, that level of participation is becoming antiquated. The market needs more active reinsurers simply because of the way the market has turned. A reinsurance carrier expecting to have a profitable book needs to be more involved and understand what they're reinsuring. Additionally, new insurtechs and insurers are entering the insurance market seeking more advice from experienced reinsurers. At times, they need more hands-on feedback or help navigating in a way that they couldn't receive in the past.
Some reinsurers, like Swiss Re have taken that a step further. We've started creating different tools that enable us to sell directly to insurance companies and the larger primary provider market, acting as orchestrators ourselves. As a response to the needs of the primary provider market, we see it as only natural. As risk-bearing entities are now offering solutions, I think it can create pressure on policy administration systems as they continue to act as orchestrators. It's interesting to see how it shakes out in the next five to 10 years, the idea of which ecosystem approach has the better leverage when it comes to ‘managing ecosystems.’”
How have new technologies impacted property insurance underwriting?
“Aerial imagery is helpful and interesting. When you're thinking about imagery technology, know that in its simplest idea it’s sending a balloon into the atmosphere to take incredibly high-resolution images of neighborhoods for providers to review buildings and structures. Aerial imagery has stepped into claims handling, and it offers new ways that property insurance providers can quickly react to weather events and understand what properties were affected. The level of granularity we're able to get from aerial imagery, and the speed of response is phenomenal. Swiss Re has taken advantage of this when it comes to our claims solution, Rapid Damage Assessment (RDA), and we are increasing its utilization after catastrophic events.
RDA looks into increasing responses to weather events, but new technologies are coming into play in some of the ways that we're still examining unstructured data versus structured data. Unstructured data can be used to expand the underwriting data for a property risk from 2-4 sources to exponentially more sources. There are solutions that can web-scrape and provide underwriting insights that only the most artistic and creative underwriters could do up to now. This unstructured data can be utilized not just in property underwriting, but casualty underwriting as well.
For example, if you're looking at a business that says they have $80,000 worth of liquor sales every day, you can check that with unstructured data, which may look into social media hits and other third-party sources. In theory, it could share with an underwriter that the liquor sales are much closer to $120,000 without having to look into the business’ bookkeeping. This unstructured data coming is incredibly interesting and still very much in the early stages.”
Where’s the gap in that market, and who’s taking a unique approach?
“The gap is in the interior of the home. We have a lot of insights about the exterior, but little understanding of the interior. What property is in there? Does the insured have content coverage for the equipment and assets? Does the insured have enough building coverage knowing they've remodeled the property? This is a huge gap, and some providers are starting to provide insights using Internet of Things (IoT) devices.
In addition to coverage gaps and premium leakage, this can help us understand safety and how equipment and contents are being utilized inside the property. Is there an automatic water shutoff or a flood sensor by a dishwasher that will automatically shut off the water? Some of this is providing useful data, but there's still a gap to understand what exactly is inside the property on day one to use in underwriting.
As to unique approaches, I go back to unstructured data. Some providers are pulling from online listings, so when there's a new property sale, the provider will apply AI imagery models to analyze interior photos. I must acknowledge that here lies a unique privacy layer that comes into play as you're now going inside someone's home to understand what risks they have. Yet, the gap exists and will grow more challenging going forward as more technologically-advanced equipment and devices are being developed and purchased by the insured. As an industry, we will have to solve for it.”