AM Best is taking a huge step in the wrong direction. There brief is not about innovation but rather about measuring the financial results of insurers.
Period.
If an insurer can achieve the requisite financial results using technology, great ! If the insurer can achieve the requisite financial results using leprechrauns, again that is great !
Hundreds of consulting firms and other gurus can’t agree what ‘innovation’ really is or how to achieve it. AM Best is far, far out of its league by attempting to define or describe ‘innovation’ and use it as a hammer on insurance firms.
My last two employers varied greatly. One company spent millions moving to the latest technology and employing advanced analytics in underwriting and ratemaking. The other applied less complicated technology and is easing into analytics. Unfortunately, the first one has lost more than 40% of its surplus over the past 4 years while the less technological advance company has combined ratios in the low 80s over the past eight years. It takes much skill and knowledge to purchase and implement the latest technology. Most companies do not have the skillset to complete the task properly. Very few actuaries and underwriters have the background or knowledge to manage the latest innovations while those people with experience most likely have little experience in insurance or risk management. This will change over time, but the fear is that agencies like AM Best may try to pressure companies to change before they are ready.
AM Best is taking a huge step in the wrong direction. There brief is not about innovation but rather about measuring the financial results of insurers.
Period.
If an insurer can achieve the requisite financial results using technology, great ! If the insurer can achieve the requisite financial results using leprechrauns, again that is great !
Hundreds of consulting firms and other gurus can’t agree what ‘innovation’ really is or how to achieve it. AM Best is far, far out of its league by attempting to define or describe ‘innovation’ and use it as a hammer on insurance firms.
Amen to that, Barry!
My last two employers varied greatly. One company spent millions moving to the latest technology and employing advanced analytics in underwriting and ratemaking. The other applied less complicated technology and is easing into analytics. Unfortunately, the first one has lost more than 40% of its surplus over the past 4 years while the less technological advance company has combined ratios in the low 80s over the past eight years. It takes much skill and knowledge to purchase and implement the latest technology. Most companies do not have the skillset to complete the task properly. Very few actuaries and underwriters have the background or knowledge to manage the latest innovations while those people with experience most likely have little experience in insurance or risk management. This will change over time, but the fear is that agencies like AM Best may try to pressure companies to change before they are ready.