As an industry, insurance is fairly unique. Insurance packages the raw material of capital, and delivers a product that consists of a promise of financial recuperation and, in many cases, personal support and service in the event of a loss or liability. Its scope leaves little of the human world untouched, with every life, asset or liability a candidate for some form of coverage and protection.
Some of it is literally rocket science, with insurance coverage of aerospace, satellite and space exploration fields.
Over a 20-year career in insurance, my enthusiasm has been continually refreshed by the variety that exists in this market. And while this variety is a boon for attracting and retaining interest in the industry, it is also a root cause behind the perception that the industry under-invests in technology.
To support the pricing of an insurance contract, and facilitate effective management of the portfolio of exposures, it is first necessary to define the risk profile of the insured assets or liabilities. This profile consists of the coverage terms of the insurance arrangement; the hazards to which the risk is exposed; the mechanics of how the risk will respond to an event; and the financial impact that this combination incurs.
For a well-defined insurance product, like home or car insurance, over a localised and homogenous book of business, the scope of this risk profile is constrained and manageable. For a Specialty insurer operating in several jurisdictions, with flexible product definitions for diverse and exotic lines, it is ultimately one of the most complex modelling conundrums that a business intelligence practice will face.
The following series of articles will look at Verge360’s approach to one aspect of this information challenge, Portfolio Management, and how operational engineering and choosing the appropriate technology can assist in meeting the needs of the modern Specialty insurer.