Black Box Underwriting - Opportunity or Threat?
Jill Murphy Regional Marine Manager, Starr Underwriting Agency (Asia) Ltd, Melbourne, Australia
Introduction
To be resilient and sustainable - we must first remain relevant
• To Clients
• To Shareholders
• As a profession to attract young practitioners
Implications of technology
1. How can technology assist us manage our portfolios and deliver better underwriting results?
2. How will we remain relevant and responsive to our clients?
3. With so many career options open to young people these days how will we attract and train the underwriters of tomorrow?
Insurers who anticipate and
plan for change can create
their own future
Insurance 2020: Turning change into opportunity PWC January 2012
“Affordability and flexibility of technology is creating new opportunities.”
“Automation is essential if they are to remain
competitive and defend market share.”
Mitchell Wasserman, President & CEO, Oceanwide
Investopedia explains 'Black Box Model'
The "black box" portion of the system contains formulas and calculations that the user does not see nor need to know to use the system. Black box systems are often used to determine optimal trading practices. These systems generate many different types of data including buy and sell signals.
Black box
• Predictive Modeling Tools
• Catastrophe Modeling
• Accumulation Tools
• Risk Assessment
Corporate functions
• Compliance Matters
• Sanctions Screening
• Accounting and Credit Control Functions
• Sales and Distribution
• Training
Model calculations “Garbage in-garbage out” paradigm
GARBAGE DATA
PERFECT MODEL
GARBAGE RESULTS
PERFECT DATA
GARBAGE MODEL
GARBAGE RESULTS
How can technology assist us
manage our portfolios and
deliver better underwriting results
Data
• Internal • the quality and depth questionable
• data bases too small to be useful
• External • Where is the accurate data on shipping casualties and the cost to us as
cargo insurers?
Are you obsessed with data?
• Understand attritional losses
• Justify ratings and quantify other underwriting decisions
• It is an underwriters role to understand risk
Our changing world
Globalization and Containerisation
• Smaller packages delivered “Just in Time”
• Small Medium Enterprises (SME’s) – • driving force of the modern economy
• Influencing insurance industry changes
• Defining the future of a sizeable amount of our business as cargo insurers
Our changing world
Direct to Customer Channel
• Less face to face interaction
• An integration of Products
• Increase in simplicity and speed of transactions
How do we remain relevant
and responsive to our clients?
Automation
• Commoditization / Standardization
• Minimal Advice
• Ease and Speed to Market
• Multiple Distribution Channels
• Cost Efficiencies
• Increased Sales
• Efficiency Gains v Increase in Smaller Claims
• What risks should be automated
• Increased Profitability??
Black box technology
• It is just a distribution channel!
• Risk selection and pricing adequacy are still our responsibility!
How will we attract and train the underwriters of tomorrow?
Claims
• Generalized and Centralized Claims Teams
• Principles of marine are being ignored
• Claims Department detached
Are we learning from our mistakes as underwriters?
Training
• It is each generations responsibility to promote and enable the transfer of knowledge from senior to junior underwriter
• Technology presents us with new challenges not encountered by our predecessors
• Taxi Driver
• Bookkeeper
• Paralegal
• Air Traffic Controllers
• Parking Meter Attendants
• Travel Agents
• Interpreters and Translators
Cargo Underwriter?
Thank You
Black Box Underwriting - Opportunity or Threat?
Jill Murphy Regional Marine Manager, Starr Underwriting Agency (Asia) Ltd, Melbourne, Australia