<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=158793&amp;fmt=gif">

Technology adoption in the insurance industry – Part 3: Embrace the challenge

Blog - 06.02.2019

In the final part of our series looking at technology adoption in the insurance industry, James Lay and Matthew Jones from Simplitium urge firms to embrace the challenge of integrating new technology solutions into their business to allow them to meet growing demands from the marketplace.

ModEx Screenshot Ipad

Incumbent insurers are some way behind the technology curve and they know it. While the insurance sector has always been a slow-moving herd mentality industry, firms face the very real possibility of their operations and business growth being compromised by legacy systems which can no longer meet the increasing demands of regulators and clients and which are increasingly very expensive to maintain. How can firms embrace disruption in the catastrophe modelling market and make it work for them?

The cat risk modelling industry has seen little change for the past 30 years. Whilst there are some positive consequences of this, such as a standardisation in methodologies and tool sets, it has also resulted in less desirable consequences such as high costs, constrained route to market for new vendors, less innovation and limited model choice for (re)insurers. Due to the proprietary nature of mainstream modelling platforms, there is a considerable amount of pain involved when it comes to adopting new models.

Consequently, the catastrophe modelling space is long overdue a disruptive influence and the wider adoption of open source technologies is finally making that a reality. However, new technologies bring their own individual set of challenges so how do firms decide on the best approach to ensure this disruption works for them?

Few firms have the in-house technology expertise or resources that are required to make this step-change but that need not be a barrier. Firms need to identify and work together with a trusted technology partner, like Simplitium, who can provide the necessary technology expertise and support them through the change process. Simplitium’s ModEx solution delivers a hosted and fully managed service that offers a new and cost-effective way for firms to meet their modelling requirements. ModEx creates an ecosystem where model vendors can make their models, hazard data and analytics available to the industry via a single platform. Working with vendors from all over the world, ModEx improves the quality and choice of models and services available in the market

We are at a pivotal point as an industry. Technological advancements are reducing the market barriers and making it easier than ever before for (re)insurers to adopt new or alternative cat models.

Open source frameworks and technology platforms can improve the interconnectivity between different systems and technologies allowing firms the ability to access everything in one place. While this approach has existed in other industries (e.g. Amazon offers retail, music, films, and groceries through its portal) it has not been available in the insurance industry to date.

The benefits of adopting open source modelling platforms are increasingly compelling. Solutions are architected to take advantage of free technologies which can deliver significantly lower costs straight to the bottom line, ever-more important at a time when costs are under the microscope. Increasingly, it is strategically important to have data separate from proprietary platforms, allowing easier reuse and enabling firms to avoid being locked-in to expensive maintenance and upgrade contracts that typically arise from using proprietary platforms.

Open source frameworks, such as the Oasis LMF, can also unify access to a wider range of exposure management tools and drive further investment. For example, as the cost of entry to model developers is much lower it should improve the range of models available to organisations, thereby increasing the coverage and choice available in the marketplace. Additionally, an increase in the use of open source solutions will facilitate greater transparency, moving away from the more black-box approach and, in turn, providing access to a broader community that is committed to improving the world of catastrophe modelling to better understand risk.

We are at a pivotal point as an industry. Technological advancements are reducing the market barriers and making it easier than ever before for (re)insurers to adopt new or alternative cat models. With reduced operating costs, infrastructure requirements and training needs, the argument for multiple model usage is stronger than ever.

Improved views of risk can only be of benefit to everyone and technology will be fundamental to this. While (re)insurance companies still have a fear and reluctance of changing or adding models, due in part to the regulatory overhead, the greater risk is that of remaining static. By embracing and leveraging modern technology, the industry can shift away from legacy systems, reduce the barriers which have traditionally prevented multiple views of risk, and move towards greater process and resource efficiencies

 


Want to read more?

Part 1: Dawn of the Revolution?
In the first of a three-part series of articles, James Lay and Matthew Jones from Simplitium examine the need for the insurance industry to urgently embrace the benefits of adopting new technology solutions.

Read Part 1 >

Part 2: Overcoming Inertia
In the second of our three-part series looking at technology adoption in the insurance industry, James Lay and Matthew Jones explore how firms need to adopt a new way of thinking to truly harness the benefits of new technology solutions. 

Read Part 2 >

Part 3: Embrace the Challenge
In the final part of our series looking at technology adoption in the insurance industry, James Lay and Matthew Jones from Simplitium urge firms to embrace the challenge of integrating new technology solutions into their business to allow them to meet growing demands from the marketplace.

Read Part 3 >