By: Munich Re
▪ Digital transformation posing new challenges for insurance industry
▪ Digital solutions from Munich Re support insurers across entire value chain
▪ Data-analytics tool “The Box” improves loss ratio and efficiency in motor business
▪ AQUALYTIX delivers key findings about drivers of water-mains damage
“At Munich Re, our goal is to pioneer digital solutions for the insurance industry. So we have been investing heavily in data analytics and artificial intelligence, in order to support our clients with innovative methods and new products. This means faster claims estimates and handling, and better pricing as a result of improved accuracy in risk assessment. Not to mention better loss prevention in the first place.” – Doris Höpke, Member of the Board of Management
Data analytics and artificial intelligence open up new possibilities for managing and covering risk. Nowadays, Munich Re experts combine primary insurers’ portfolio data with external, public sources, for example about site geography, building construction, weather or socio-economic status. By applying machine-learning principles, Munich Re can discover hidden loss drivers and respond accordingly, for example by introducing loss-prevention measures or adjusting pricing.
Taking the example of motor insurance: “The Box” supports cedants in managing their portfolios, by using machine learning to precisely predict expected damage. If one then adds external data such as weather conditions, accident statistics or socio-economic information to the mix, the loss estimates become even more accurate and loss ratios can be measurably lowered. The tool is completely automatic, allowing primary insurers to price more efficiently and significantly reduce costs.
Another Munich Re data analytics initiative is called “AQUALYTIX” and applies to water-mains damage. For over ten years now, more than half of all losses in traditional residential-building insurance have come from water-mains damage – a problem for which no satisfactory solution has yet been found. Munich Re’s experts again combined the primary insurer’s portfolio data with external sources to analyse the situation. With the help of machine learning, they can thus identify the risk drivers for individual buildings, and predict the losses for the coming year accordingly. This enables primary insurers to improve their portfolio management and thus their loss ratios.
New technologies and the ability to process large amounts of data are revolutionising the value chains across entire industries – including in insurance. In order to identify the coming changes to the overall risk environment, Munich Re launched its TechTrend Radar already in 2015, and has been updating it every year since. The Radar provides a broad perspective on important tech trends and how they will apply to the insurance industry (link).