Once the most common complaint voiced about the barriers to re/insurance innovation was that the amount and quality of data wasn’t available to enact transformation, but “that noise has completely gone”. In a discussion with Insurance Business, Richard Clarkson (pictured left), global market leader of global specialty at WTW joined Lou Smith (pictured right), global lead of WTW’s digital trading solution Neuron, to assess how the market passed this tipping point.
Clarkson said firms are now entering a period of “data overwhelm”, where they’ve recognised that they already have the information and are now better placed to access, structure, connect and analyse it. With that has come the significant expansion of pricing teams and the birth and evolution of portfolio management as a function. People are now beginning to use these tools to get a better understanding of their business and its key performance drivers – and they’re starting to ask the right questions about what technology and consulting solutions are needed to get them to the next level.
“People are very focused on digital trading,” he said. “They believe that the future of the market is that significant elements of it will be digitally traded. How quickly we get there and exactly what shape it takes is still up for grabs but everyone believes the shift is underway. With our Neuron solution, what we’re seeing is that as people get better mastery of their key drivers of performance and their operating models, they can not only reduce their expenses but also they can optimise their reinsurance more and more.
“They can also control their loss ratio more and so get a better combined operating ratio and a better return on equity.”
Clarkson suggested that firms that really understand their risk registers and can bring all their technical functions together can make strong risk and pricing decisions. These firms are primed to pull ahead and deliver much better returns on capital, he said.
“What’s also important to note is that everybody now expects things to be done completely, immediately and transparently,” Smith said. “When they make a decision, they expect it to be executed straight away.
“Whether it’s to do with pricing, or portfolio management, or scenario planning, or access to data, I think people are now starting to realise that if decisions and actions are not immediate, then there are inefficiencies within their business around capital risks and pricing, and whether they turn on or off different classes and segments.”
Clarkson said that WTW’s Neuron solution is establishing a digital marketplace for London, allowing its founding insurer partners to trade in a more modern and streamlined manner. Neuron has a very distinct design feature in that the marketplace and the algorithms that run it are completely distinct.
“So, we’ve built these accelerator algorithms and we’ve got a number of insurers coming on board as our ‘founders’ and we help deploy these in their estate,” he said. “They will then use that to trade with our marketplace but, crucially, they can also use those algorithms for other use cases… All our founders have their own variations of use cases they want to test and, in this way, we support people in starting their journeys.”
It’s easy to get caught up in the complexity of the challenges facing the marketplace, Smith said, but it’s also important to embrace the simplicity at the heart of the solutions available.
“There’s been a ton of innovation in the industry but it has been on point issues and in verticals rather than looking at more holistic problem solving,” she said.
“What we’re trying to do is make processes more efficient, by more effectively using our people, as powered by data, connectivity and transparency. The feedback that we’ve been getting shows that it is resonating.”
