Though I am but a humble consultant for a software vendor, I share something in common with many of you for-reals insurance professionals: I have been deepening my understanding of the P/C (Property/Casualty) insurance industry with courses from The Institutes. They are best known for their respected Chartered Property Casualty Underwriter (CPCU) designation, but I have been pursuing something else: just last week I earned the lofty (if unwieldy) title of Associate in Commercial Underwriting—Management. Yet beyond adding the prestigious “AU-M” after my name, how does this certification relate to building better software for the insurance industry? Here are some specific topics on my mind:
Underwriters have long evaluated individual building risks following the acronym COPE: Construction, Occupancy, Protection, External Exposure. While still a useful framework, COPE suffers from two traditional weaknesses. First, it depends on information that can be gleaned from a written application or by physical inspection. Second, COPE focuses heavily on risk from fire as the peril most likely to cause severe or total loss. As a consequence, it provides little guidance on how to evaluate other perils in a consistent manner across different submissions and underwriters.
These limitations were understandable and justifiable in a world where data was difficult to collect and verify, but now there is a wealth of third-party data for “external exposure” to crime, hail, brushfire, flood, wind, and other perils. Guidewire Live’s Spotlight application—now available within PolicyCenter 9.0—was built to incorporate these data sources into the underwriter’s decision following each insurer’s particular underwriting guidelines.
According to my textbook, “depending on the results of high level reports, underwriters responsible for managing a book of business will frequently request increasingly detailed reports to more accurately identify the source of problems.” Sounds simple enough… but request from whom? “Such reports are readily available and can easily be provided by the insurer’s IT department.” Ha! Seriously, who wrote that? Most of you know it wasn’t someone at your company!
That’s not meant to badmouth IT; it’s just a reality that the report they built for you last month will not answer this month’s questions. Though we built our original Guidewire Live applications to give our customers better insight through benchmarking and geovisualization, we were surprised by how many users were most grateful for the simplest tool of all: Export. Simply getting a list of claims, features, or policies with relevant characteristics for further analysis and follow-up was often more than could “easily be provided by the insurer’s IT department.”
Again according to my course materials, “forecasting accidental losses is fundamental to the quantitative evaluation and comparison of risk financing plans.” Because actuaries have long used loss development triangles to predict losses for either large individual accounts or an entire product line, we created Comparative Triangles as one of our benchmarking offerings when we launched Guidewire Live in 2012. Some insurers found these valuable for understanding industry trends and continue to use them each quarter. But many customers explained to us that their own triangles had to be tweaked just so in order to be accurate for their purposes in their particular circumstances. So we also built the same capability into InfoCenter, which can be configured to each insurer’s exact data sources and end needs. Filterable loss development triangles are now available out-of-the-box in InfoCenter 9.0.
Triangles are just one example of a general principle. The goal is to bring together the best of both worlds: the (relatively!) easy implementation of hosted SaaS apps, and the customization—or even personalization—of analytics to best meet the insurer’s needs.
When I first wrote this post, I laced all of the examples above with forward-looking statements about what Guidewire is going to do with our business intelligence and predictive analytics products to keep advancing the ball. Alas, there are lawyers around here who are paid to be more cautious than I. So all I can say is, “Watch this space… and come to Connections!” Meanwhile, I hope your ongoing education gives you as much food for thought and challenges you to improve your own company’s performance. See you at The Institutes graduation party!