Recent events such as the COVID-19 pandemic and explosion in Beirut have underscored the need for marine insurers to develop better ways to understand their risk exposure at both a macro and micro level. For events of this magnitude, the impact on industry participants is significant: the Beirut explosion has caused $15billion in damage while the impact of COVID-19 will be profound and long-lasting.
Recognizing their vulnerability to events of this type, marine insurers are working to improve their ability to anticipate and quantify the potential impact. As they do so, the importance of being able to collect, manage and analyze data has become clear. Insurers recognize the need to apply sophisticated analytics and artificial intelligence (AI) to draw valuable insights from their data that go beyond standard pricing and risk assessment. However, the rapidly increasing volume and variety of data that is now available to the maritime and insurance industries have made it challenging to extract the maximum value and the most valuable insights from the data. For those that have committed to enhancing their analytics capabilities, there is a growing realization that the implementation of sound data management processes is a crucial first step.
New research by industry analysts IDC shows that data management is now a strategic priority for nearly 40% of insurers, with areas of focus including data centralization, master data management (consolidating data from different sources to create a single version of the truth across the business), and data quality. These findings are based on a global survey of 125 industry practitioners.
While better data management practices have the potential to dramatically enhance resilience, compliance and visibility, many marine insurers have not historically prioritized these activities. According to the IDC survey, only one-third of insurers are actively practicing master data management. This is changing rapidly as industry participants look to enhance the value of analytics and become more dynamic and confident in their decision-making. Many participants are now starting to ask key questions such as: How reliable is the data we use to make decisions? How do we manage increasing data volumes and varieties? And how do we extract the maximum value from our data? Achieving these ambitions not only provides point-in-time visibility, but also drives more efficient and accurate forecasting and response times.
Whether the goal is to underwrite more profitably, reduce risk exposure or provide best-in-class customer service, industry participants need to focus on three key capabilities:
1. Data centralization and workflow automation
Within an organization, data is often siloed in different systems and spreadsheets that are owned by various user groups. The abundance of manual processes and data fragmentation typically lead to inconsistencies and inefficiency when attempting to derive insights and make decisions. The centralization and automated linking of multiple datasets provide a more complete, granular understanding of the external market, your customers, and your portfolio (e.g. across cargo or hull). This in turn drives better-informed decision-making.
2. Data quality
Confidence in data is crucial, however many insurers lack adequate tools to control data quality (a key area of focus in the IDC white paper), leading to major downstream issues in areas such as pricing and underwriting, reporting and customer service. For example, participants may use unnecessary buffers in decision-making as a consequence of low confidence in data inputs and the processes surrounding data validation and stewardship. Whether it is the pricing of an asset, understanding exposure, or management reporting, the quality, timeliness and transparency of the data are critical for measured and calculated decision-making.
3. Master data management
In an industry that draws on so many disparate data sources and collects them across multiple organizational silos, master data management is essential. Being able to reconcile data from different sources and create a single version of the truth across the business will not only deliver confidence in decision-making based on consistent, validated and complete data, but will also support response times, scale and investment in strategic initiatives that deliver growth.
In a maritime environment characterized by elevated volatility and new opportunities, continued investment in foundational data management is imperative for the marine insurance industry. In the move to leverage new technologies, such as cloud computing, advanced analytics and data lakes, it is the accuracy, completeness and granularity of data that will drive maximum business value—through better risk and exposure management, improving pricing models, supply chain transparency or customer service and acquisition. As industry participants seek to simultaneously stay ahead of industry disruptors and identify more dynamic ways to drive growth and manage their portfolios, having a robust data management platform in place will enable them to take full advantage of new technologies designed to support those goals.