Big data impacting insurance underwriting

When you think of insurance you probably think of Geico’s Gecko or Progressive Insurance’s Flo. Your investment portfolio probably owns one, or more, insurance companies. A few companies that may sound familiar include Cincinnati Financial, Chubb Insurance, Travelers Insurance and Met Life.

When you think of insurance you probably think of Geico’s Gecko or Progressive Insurance’s Flo. Your investment portfolio probably owns one or more insurance companies. A few companies that may sound familiar include Cincinnati Financial, Chubb Insurance, Travelers Insurance, and Met Life.

There are two broad categories of insurance companies. Property and casualty insurance will reimburse you for your losses in a car accident or when your house burns down. These policies cover liability for damages to other people and their property caused by you. You may also have life insurance, which insures against the risk of unexpected death and usually pays a benefit to your spouse or children upon your death.

Lire Aussi :  Black Friday MacBook deals live blog: the cheapest Apple MacBook Pros and MacBook Airs online right now

Each insurance company underwrites risk based on aggregate losses in a specific category and expected loss rate. As a regulated industry, like banking, insurance companies must maintain certain levels of capital based on the risks they write.

When a major event such as an earthquake, wildfire or hurricane occurs, and many different insurance companies are affected by the loss, the total capital of the sector begins to decrease. A smaller capital base forces the company to reduce the amount of risk it can take, reducing competition which leads to higher insurance rates.

Lire Aussi :  Apple's AirPods Pro may be a quickfire, inexpensive solution to your hearing loss

As artificial intelligence, big data, and cloud computing have become more common in recent years, companies are looking to use these capabilities to improve underwriting and provide cost savings to customers.

One example is Kinsale Capital Group, founded in 2009 by former industrial executives. They focus on insurance companies that are small in terms of revenue and conduct business in high risk categories. Generally, insurance companies underwrite these risks in a standardized manner given a small premium to reduce underwriting costs. Kinsale has created an underwriting process that uses big data and artificial intelligence to provide lower cost insurance for these customers.

Another company using big data is Palomar Holdings which is an insurer that specializes in specialty insurance for residential and commercial clients in areas such as earthquake, property excess, liability, and flood insurance. With technology, they were able to reduce costs and help customers.

Lire Aussi :  This 8K monitor can be viewed in 3D from all angles

Each individual’s risk and return objectives are unique to them and need to be discussed with their investment professional before making any investment decision.

Sources: Factset, Company Reports

Beese Fulmer Private Wealth Management was founded in 1980 and is one of the oldest and largest investment management firms in Stark County. The firm serves high net worth individuals, families, and non-profits, and is ranked as one of the largest asset managers in Northeast Ohio.

Source

Leave a Reply

Your email address will not be published.

Related Articles

Back to top button