Insurtech advances will soon drive down unacceptably high expense ratios in the inland marine sector, making it possible to insure even hard-to-place, small or one-off inland marine risks at the best possible rates.
Carriers and brokers are building Internet-based underwriting tools that can make this a reality by combining big data, instant analytics and the artificial intelligence of powerful algorithms.
Insurtech advances will soon mean that policies for many smaller inland marine risks will be obtainable with a few clicks, through Internet-based quote-and-bind systems fueled by the science of predictive analytics. Artificial intelligence built into insurtech tools will allow cover to be rated, quoted and bound in a matter of minutes. The tools will remove several percentage points’ worth of expenses for insurers and brokers, making small risks more attractive to insurance markets and consumers. Early adopters will be the biggest beneficiaries, with room in the market for early followers. However, buyers will benefit most.
Creating Accurate Risk Profiles
Many inland marine classes, such as construction and transportation, have access to a wealth of available data, including equipment valuation, operator experience and property statistics.
Systems can automatically extract and analyze this information to create extremely accurate risk profiles. Further analysis, informed by high-level underwriting expertise encapsulated in algorithms, then delivers risk-based rates for each risk presented to the system.
There remains, of course, a vital role for underwriters, who can adjust the algorithms and the prices they yield using their own expertise and judgment to suit different risk appetites and more complex risks. For qualifying risks, the insurtech technology then delivers quotations and can bind the risks through an intuitive, real-time portal that delivers documentation and links to back-office systems. And where a risk cannot be handled by the technology, an underwriter can make a risk decision.
Such insurtech platforms have been available for years in the areas of consumer home, contents and auto cover but are only just coming on line for inland marine. They allow the carrier to evaluate the risk and place a fair price on the insurance—and maybe to offer additional, related products.
These placement systems will be useful not only to small operators and midsize entities but also to large corporations. Think of a company with a million-dollar annual premium spend that discovers from its insurer and broker that its property insurance will not cover an equipment loss related to a one-off construction project, for example, or a small array of solar panels, or any of a number of other specialist risks. A minor installation floater would be required but could be very difficult to obtain due to the modest premium it would attract.
Insurtech easily allows such cover to be bought separately. In only minutes, quote-and-bind platforms will create an appropriate policy for the specific risk. This will provide consumers and brokers with tools to engage in real-time transactions.
Fast, Less Labor-Intensive
Data is crucial, and today it is abundant. For example, an underwriter may know that new builds by a national franchise hotel chain are all five stories tall, take eight months to build and are worth $8 million. They can apply this knowledge, alongside the experience of the contractor and the equipment involved in the project, to gain a very accurate picture of the risk and provide the best feasible price to cover the project.
It may incorporate psychographic information, which human underwriters would require days to compile. Even when conventional underwriters have all that information at their fingertips, if cover is needed on Monday to satisfy a lender, and the presentation is ready on Friday afternoon, they will struggle to deliver the cover through conventional means. An online quote-and-bind system will create the required insurance almost instantly.
Retail brokers will no longer need to contact 10 markets and repeat the same risk details multiple times for a paltry premium. Complex inland marine coverage–including insurance for items as diverse as shipboard cargo and construction equipment–will, of course, always require the focused attention of a qualified underwriter, but online systems will quickly assemble and deliver the relevant data.
Among those addressing the need for insurtech solutions in the inland marine space are larger brokers, who possess a wealth of data and are seeking to enhance the customer experience. Their systems typically will allow interested underwriters to “plug in” to gain automatic access to the risks they have to place.
Another model gaining traction is the carrier portal, which is designed to receive information that fits a predetermined underwriting box. This model requires understanding the nuances of each system and may also mean additional manpower to find the right solution. Insurtech solutions will reduce the requisite keystrokes and will be able to identify a fast, accurate and appropriate risk solution.
For carriers investing in this space, it’s possible to create a more efficient way to handle risks with common characteristics. And insurtech systems generate data that simplifies the process of making adjustments based on performance. The low level of underwriting touch required by an insurtech system capitalizes on the ability to put informed rules and abundant data together, which allows unparalleled speed to market.
They may wish to deliver the solution through managing general underwriters or create package solutions for specific types of clients, such as artisan contractors or retailers. Once the rules are developed, any such risk can be assessed swiftly through the platform, without active underwriting. The carrier may, of course, adjust the code at any time to reflect changed risk appetite, the market environment or other variables.
Fair Price, Tailored Coverage
For the end customer, a great advantage of the system is that it generates a fair price and coverage tailored to the risk needs, based on all the available information. Inland marine has been a challenging line for smaller, low-complexity risk, not because of losses but because of underwriting expense associated with the size of the risk. One potential benefit of an inland marine insurtech platform is increasing the number of potential insureds who will be able to transfer risk at a fair price.
Insurtech platforms capitalize on the “science” of underwriting that can be prescriptive to smaller, low-complexity lines of insurance while leaving room for the “art,” or judgment, that comes from an underwriter’s expertise and is needed for larger or more complex lines of insurance. For most risks, the AI systems do all the work, eliminating much of the underwriting and placement expenses. That makes smaller inland marine risks (those with premiums below $10,000) much better value for everyone in the chain—from the ultimate insured (who will receive a more commensurate price) to the retail broker (who can place and bind the risk in minutes, for very low cost) to the MGUs and insurers (who can offer the cover at lower rates and still see a decrease in underwriting expenses).
Insurtech has arrived for inland marine lines, making it possible to provide cost-efficient, quality coverage to a large group of buyers—and ultimately helping businesses and consumers optimally manage their risk.
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