Pricing technology failing to deliver the promised benefits

Actuaries and underwriters are struggling to effectively do their jobs due to the state of pricing technology, according to a new report from independent research firm Coleman Parkes, which conducted a survey on behalf of pricing-focused insurtech hyperexponential.

The report found that over half (56 percent) of actuaries and underwriters believe their organisation’s current technology is limiting their underwriting and actuarial ambitions.

Commenting on the unrealised value of data, the report found that some 81 percent of specialty and commercial actuaries and underwriters found technology restrictions were preventing accurate pricing decisions.

The survey of 245 underwriters and 105 pricing actuaries across the UK and US working in specialty and commercial (re)insurance acts as reminder to the industry that, despite significant investment, pricing tools are still not adequate for the tasks needed from technology by underwriters and actuaries.

A further 53 percent of survey respondents believe their pricing technology is preventing them from responding effectively to the rapidly changing risk landscape.

The report found that even the most forward-thinking specialty (re)insurers are “dangerously complacent” and need further investment ahead of a future hard market.

Another worrying statistic highlighted that the average pricing model takes almost 200 days to construct in the US, versus 150 days in the UK. Even a simple parameter change could take on average 23 days to implement, with database changes taking an average of 57 days.

hyperexponential CEO and co-founder Amrit Santhirasenan highlighted his “frustration” with the report’s findings, saying that “the tools and systems used to harness data are fragmented and unfit for purpose”.

The survey produced some glimmers of hope for the industry, not least of which was the amount of unrealised value sitting in untapped data sources. Over two-thirds of respondents were optimistic about having technology to handle the volume of data, and while many blamed data silos for the lack of transparency and ability to underwrite emerging risks, there was optimism that new technologies, including AI, would help turn unruly data into actionable insights.

In highlighting how insurers are facing the problem, Santhirasenan mentioned that (re)insurers are “shedding legacy systems and equipping their teams with real-time insights to make intelligent decisions across their portfolio and throughout their operations”.

He continued: “I am not saying it is easy to transform one of the oldest industries in the world – it clearly is not – but the change can only come from the people: the pioneers and the innovators.”

To download the full report, click here.