SPECIAL FEATURE: INSURTECH
Assessing information: Reask Chief Commercial Officer Nick Hassam
“Data… will be critical in a competitive landscape as it affects all elements of the underwriting, pricing, policy and claim management process.” Closer to the underwriting end, Sydney-based Reask is using advanced data analytics to improve catastrophe modelling for clients including Axa and insurance-linked securities manager Twelve Capital. Chief Commercial Officer Nick Hassam says different parts of the value chain are at different stages of their data evolution. “Pricing in insurance has utilised fairly advanced methodology because of the focus on actuarial practice, so they’re doing fairly well, and then you come to the back end, on the claims side, and… you see in the insurtech space claims is starting to pick up a bit in terms of organisations building solutions that try to leverage large volumes of information,” he tells Insurance News. “Some of these big insurers have vast reams of information on the claims side, and that information can be very valuable.” Reask, for its part, derives value from external information. It collates raw climate data from “gatekeepers” such as the US National Oceanic and Atmospheric Administration-linked Physical Sciences Division, and processes it to create “effectively our own proprietary database of climate information”. “We’re taking vast amounts of quantitative information in the instance of atmospheric perils and utilising different methodologies that are novel and modern – utilising machine learning and other data science methodologies to process that information at scale,” Mr Hassam says. This is, he says, a unique approach, building on a traditional catastrophe modelling technique that largely relies on statistical analysis of historical events. As well as creating more sophisticated models, Reask “can utilise that information and the methodology we have to look at risk in the very short term, so it allows us to do forecasting in the short term”. Early results are encouraging. “Last year, during the tropical cyclone seasons around the world, we put forward a forecast of our expectations for the seasons in each basin, in terms of how many cyclones we expected, and so far we’ve proven to be very accurate,” Mr Hassam tells Insurance News. While Reask is focusing on tropical cyclones for now, “we know we can extend that [approach] to other atmospheric perils such as hail, rainfall or lack thereof, and also straight-line windstorms and thunderstorms”.
Start-ups such as Codafication and Reask are helping the old industry giants break new ground, benefitting the businesses and their customers. But rapid change is rarely without its dangers, and warnings around the data revolution have been well documented in Insurance News: the threat of redundancies and a shortening of the value chain as automation takes over; “granular” underwriting that leaves more and more individuals facing unaffordable premiums or simply rated uninsurable; privacy and security concerns as more connected devices harvest our information. Mr O’Dell says the issue of individualised underwriting came up in a discussion on legal issues at the ANZIIF Insurtech Conference in Sydney in February (Insurance News was the media partner for the conference). “If there’s going to be what’s called a negative externality in the industry, that’s usually when government needs to step in and provide some sort of service, so it’s going to be quite interesting,” he says. “You used to get your house insured based on the flood profile of the postcode; now it’s the flood profile of your house against your neighbour’s house or the one across the street.” Mr Sandaver says Big Data’s impact on commerce will throw up “some interesting areas of thought. At Codafication, we toy with concepts around the poisoned chalice with data. “Can you inherit or receive volumes of data that disadvantage your ability to price and service customers due to inaccurate sources or complexity in the data? “There may also be a huge shift in the industry one day in relation to software engineering, artificial intelligence (AI) and Big Data with compliance. Like financial services or the construction industry, we all have to have qualifications, licences and adhere to regulatory law and compliance within an industry. However, AI and cognitive services don’t have these requirements yet.” As for the security risks, he says: “The truth of the matter is the dark web probably already has your details, and rogue nations have already accessed your systems, you just don’t know it yet. “How we manage breaches with data and social welfare related to this in this new world where digital footprint is everywhere will be interesting. “Maybe like your fingerprints on the door handle at work, as society we may accept it, or push for higher standards from a government-control point of view. 0 It will be interesting to see.”