BusinessDissatisfaction spans the insurance industry as “Dark Age Pricing”...

Dissatisfaction spans the insurance industry as “Dark Age Pricing” dominates

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Insurers are facing unprecedented pricing challenges as they battle a turbulent risk landscape. A survey of US Commercial P&C insurers conducted by independent research firm Coleman Parkes for pricing decision intelligence leader, hyperexponential, shows the sector’s dark age pricing processes and technology debt is failing to utilize the value of data to ensure optimum pricing and portfolio decisions.

It’s no secret that the insurance industry has been lagging behind the technology curve, but insurers are continuing to suffer the consequences of the lack of innovation. Whilst actuaries struggle to maintain their pricing platforms, underwriters battle inaccurate and archaic pricing models, daily.

Insurers’ basic technology is failing to quickly and accurately ingest and process large datasets, let alone use that data to generate insights to price risk better.

Research methodology

Independent research firm Coleman Parkes surveyed 22 underwriters and 53 pricing actuaries across the US working in P&C and Commercial (re)insurance lines, on behalf of hyperexponential. The aim of the research was to identify the impact legacy technology and processes have on the day-to-day roles of actuaries, underwriters and the overall competitiveness of insurers as well as the changes technology is bringing to their professions over the next five years.

Current pricing tools leave insurers wanting

Despite major ongoing investments in technology, over half (55%) of US underwriters and actuaries think it’s impossible to maximise profitability with their current pricing technology. Pricing goes hand-in-hand with profits in the insurance world, and with 84% of insurers in a state of fear that they won’t have fit-for-purpose pricing models in the future, it’s no surprise there is considerable dissatisfaction spanning the industry.

In addition to this, a large majority of Commercial P&C underwriters (71%) reported they find it hard to keep up with the rapidly shifting risk landscape, which is to be expected when traditional pricing tools act as spreadsheet replacements rather than a decision engine.

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Wasted time and wasted skills

Archaic technology means outdated processes and inefficient systems are wasting the time of highly skilled underwriters and actuaries, standing in the way of innovation. For actuaries, releasing new pricing models takes on average 192 days, and underwriters are spending approximately 2.8 hours each day on data entry, which is almost two days a week lost to unnecessary manual processes.

If insurance embraced and leveraged automation at the pace of other industries, underwriters could unlock huge potential to focus on more complex
and evolving risk landscapes. They know it too – 51% of underwriters believe they’ll respond faster to emerging risks with better technology.

Blow away the cobwebs, it’s time for pricing decision intelligence

There’s far too much misunderstanding surrounding pricing models. Insurers mistakenly believe pricing platforms can be used to make better pricing decisions – but this isn’t the case, and never has been. These tools were built to replace spreadsheets, speeding up the time it takes to build complex pricing models. They were not built to rapidly transform data into insights to drive profitable decisions in the face of rapidly changing risk landscapes.

To achieve an iterative feedback loop between data, insights and decisions, insurers need pricing decision intelligence (PDI). With PDI, insurers can continuously strengthen their data assets, insights, and decisions, and only then can they leverage their unique and rich pricing data to drive continuous improvement at the speed of the market.

Commenting on the industry’s failed approach to pricing, Amrit Santhirasenan, CEO and Co-Founder of hyperexponential said: “Today’s insurance pricing and underwriting relies on more data from more sources than ever, but the tools and systems used to harness this data are unfit for purpose. Insurers are limited by a lack of visibility into risk and outdated pricing models that weaken decision-making. The world is transforming, and it’s time to look towards a brighter future with innovative pricing and without technological barriers”.

The decisions insurers make drive innovation and empower society to outsmart the unknown – unlocking hidden potential in the world.

hyperexponential has built the world’s first pricing decision intelligence platform for insurers, hx Renew. It reimagines the flow from data to decision, creating a feedback loop that continuously strengthens the data assets, insights, and decisions of insurers and ultimately their bottom line. Some of the most established insurance brands write over $22bn of premium annually in hx Renew. hyperexponential is backed by Highland Europe, a global leader in software innovation. The company is headquartered in London, with an office in Warsaw.

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