Insurance Data Diary

No. 4, November 2022

Insurance data and technology commentary and news from Quotech Founder Guillaume Bonnissent.

Another fine mess

I WINCED AT NEWS OF THE £9,695,000 FINE levied by the UK’s Prudential Regulation Authority on leading Lloyd’s business MS Amlin Underwriting. It will have left many other UK risk carriers thinking, as the saying goes, that there but for the grace of God they go.

Amlin was slammed by the regulator for “failing to comply with its regulatory obligations relating to its governance and oversight of underwriting, underwriting controls, management information, data quality, and risk management strategies and systems” during about five years until the end of December, 2019.

The PRA’s concerns were heavily founded on systems it deemed inadequate after an investigation which revealed, according to the regulator, problems including shortfalls in the management information available to the Board, the absence of an adequate data repository system, and unsatisfactory underwriting and data-quality controls.

Yikes. A ten-million-pound ticket for duff data management (that’s after Amlin’s early-payment discount: the original fine was an eye-watering £13.85 million). It isn’t just the severity of the penalty which shocks me. It’s also my belief that most, or at least many, London companies rely on similar systems, and would fall equally far short of the Bank of England’s requirements.

It is not clear to me why Amlin was singled out. I presume that, like many of its peers, it operated multiple legacy systems patched together with new technology. The business was built over the decades by amalgamating predecessor businesses and syndicates to become what the PRA today considers “a firm whose size and type of business means that it has significant capacity to cause disruption to the interests of a substantial number of policyholders.” But Amlin is far from unique in that respect.

What is abundantly clear to me is that the kinds of challenges Amlin faced are exactly the ones Quotech solves for clients every day. We develop systems which provide anyone within a company with exactly the information they need, when and where they need it. At the centre of each client firm’s Quotech ecosystem is a Corporate Data Treasury which holds everything in a useful way and ensures a single source of truth. However, its complexity is hidden from individual users, who see simply the data they need to get their jobs done.

Quotech platforms may also include underwriting controls based on authorisations that are effective on the front line in real time. They can be linked by API to almost any secondary system, from aggregation management to accounting and even the claims side, which further supports risk management through the incredibly easy application of the correct relevant data. Similarly, complete flexibility allows any information to be isolated, parsed, and delivered to the board for whatever purpose they desire, almost instantly at any time.

If the regulator flashes a similar red card at your underwriting business, Quotech will get you out of the penalty zone for much less than £10 million.

Be boldly cautious

A fascinating new survey by Earnix sheds a lot of light on insurers’ current plans to adopt new technology. The Israeli fintech asked 298 insurance execs on three continents about their firms’ modernisation plans. They found, on the workflow side, that “most insurers… are looking to improve internal processes by giving employees the tools they need to work more productively, eliminate manual efforts and errors, and dramatically improve their time to market.”

An enormous 87% of those surveyed puts ops modernisation in their top-five priorities, and approximately 80% plan to upgrade their infrastructure in the next two years. But unfortunately 87% admitted that they have not fully developed their strategy to achieve this, and none had fully implemented a strategy. The survey found that insurers are focused on six goals: increased product personalisation, improved profitability, employee engagement, automation of processes, integration with existing applications, and enhanced forecasting accuracy.

All of those business goals echo the challenges and concerns I hear about daily from clients and prospects. Insurers – as well as MGAs and brokers – need to be bold. They should tackle the challenges of technology head on to achieve the goals they’re chasing, but they must do so in a considered way.

One proven approach which does not demand an existential commitment is to begin with a small project, one that’s carefully considered and created with the flexibility to scale, adapt, and roll-out. That allows quick wins, and fuels a valuable but undaunting learning curve.