Harnessing analytics to interpret data and uncover its hidden truths is undoubtedly the smart approach to understanding risk. Here, Miller’s Head of Analytics, Mark Zammit, discusses the importance of broker analytics and shares some practical examples of how its application is empowering better client decisions.
Make no mistake about it, we are in the era of data. According to some sources more data was created in the last two years than in all previous years combined; a mind-boggling statistic.
Governments and organisations now place so much value on data that it is often referred to as the new oil. The companies that don’t collect this commodity risk falling behind their more data-driven peers.
However, while the oil reference is compelling, at Miller we believe the metaphor also extends beyond data’s intrinsic value. Just as oil is practically useless if it is not refined, data is meaningless if it is not analysed, interpreted and ultimately used to support business decisions.
Analytics helps to uncover vital stories hidden in data that can be used to empower organisations to make the right choices. There are few industries where reading, understanding and acting upon these stories hidden in data is more important than the insurance industry.
Whether a local SME or a multi-national Fortune 500 company, clients are facing the same challenge when it comes to purchasing insurance: gaps in knowing what losses will occur in the future.
Clearly we won’t ever know this for certain, but what if you could advise clients on the range of losses they may face and their likelihood of occurring? For example, a client that knew they had a 50% chance of suffering no losses next year, a 30% chance of suffering one loss of USD 1m and a 20% chance of suffering a loss of USD 3m would make a far more informed decision about what their deductible should be and how much limit to purchase than a client that made those same decisions blind.
Providing clients with the insight to implement the most suitable insurance strategy strengthens the broker’s role as a trusted advisor. Clients may not realise they need analytics, but once they use it they won’t look back.
Our analytical approach
At Miller our analytics team is comprised of actuarial and catastrophe modellers that use cutting-edge systems and robust techniques to advise captives and other insureds on their likely annual distribution of losses, some (or all) of which they can trade off through insurance. For MGAs that bind business on behalf of carriers, we analyse the performance of their portfolio, identifying areas of profitable premium rates that the MGA can aim to grow in, while cautioning them against other unsustainable areas.
Carriers have also seen the benefits of analytics in recent years. In any negotiation, the party with the most information has the upper hand, and underwriters use analytics to improve their understanding of the risk when calculating the premium to charge.
By leveraging analytics, brokers and insureds can demonstrate they also have a thorough understanding of the risk, thereby strengthening their negotiating position. For example, if an underlying risk has changed substantially over time, perhaps due to the sale of an underperforming higher risk subsidiary, then it would be essential to place less weight on those historic losses in order to better understand future exposures.
In summary, analytics can be used to unlock vital information and insights hidden within data, narrowing the gap between the truth and our current understanding of it, and thereby empowering clients to make informed data-driven decisions.
We're here to help
If you would like to learn more about Miller’s broker analytics capabilities please do get in touch, I’d be happy to hear from you.