Industrial and individual insurances in the composite segment are always among the most complex areas of an insurance company and require a high degree of flexibility. The more unstructured the information available and the more flexible the business, the more difficult it is to manage this area optimally. This requires detailed and timely information to ensure the management of the business so that the risk is properly assessed, the correct underwriting guidelines are observed, the cover contents are correct, the agreed clauses are aligned and there is consensus on the fees.
The management responsible for industry is in possession of ex-post information at aggregated level but does not always have detailed information at underwriting level. This makes it difficult to manage the business.
Consor Universal closes this gap and thus makes it possible to optimally master the challenges of individual business.
In the past, the industrial insurance sector received the least system support. Urs Lüthy, Head of Distribution & Marketing Zurich Insurance Switzerland describes it as follows.
„In the past we have made offers and contracts in the industrial business on archaic software products like MS Word and other word-processing software.“
“Archaic”, because with these tools a continuous digitization of the processes with all participants and with all systems is hardly possible.
The right tool was simply missing. This is also understandable if one takes a closer look at the characteristics of this business:
1. High individuality of customer needs
The high customer orientation in corporate insurance forces insurers to offer tailor-made insurance products – a strong contrast to standardization as we know it from retail business. In addition, due to the complexity of customers’ needs, a great deal of data has to be recorded in the quotation process, but only a fraction of this data is transferred to the existing systems. This is confirmed by Peter Knaus, Head of Industrial Business at AXA:
“In fact, insurance companies sit on data treasures, but these are not stored in such a way that we can use them.“
2. Complex products
Individuality leads to complex products with different complexity drivers, be it internationality, foreign currency issues, foreign tax, multitude of insured objects, etc.
Jörg Bertogg, Head of Commercial Insurance Switzerland at Zürich Versicherung, is convinced:
„Every business is tailor-made by us. Off-the-shelf products are not suitable in this market.”
Today, products are still built in a division-oriented manner. Peter Knaus says
„From the customer’s point of view, the products would have to be built differently anyway. If you think only in industrial terms, then only industrial terms will come out. The same applies to other divisions. In order to meet the specific needs of our customers, we have to say goodbye to our divisional thinking.“
3. Individual pricing
Even if well-founded, own pricing models exist, the assessment of risk factors and future development in a disruptive environment remains a challenge. In each case, pricing must be reassessed from scratch so as not to project very imprecisely and possibly incorrectly into the future due to past developments. Michael Rüsch, Country Manager Switzerland of XL Catlin, takes an extremely critical view of this behaviour:
“We often look back on the history, the claims experience to date and then continue this into the future. But with new risks like cyber, that’s dangerous.”
4. Small quantities
In retail business, many policies are concluded with a low premium volume per unit. In industrial business, a few policies are signed with very high volumes per policy. These small quantities stand in the way of digitization and have led to many companies still relying on manual craftsmanship. However, it is difficult to manage and control a manual underwriting process.
For Peter Knaus, digitization is particularly important in this area:
„Insurance companies [in the industrial business, editor’s note] have actually done nothing else but partially automate what was previously processed manually. This is not yet digitalization, since the processes have basically remained the same […..] and that is also the issue composite insurers are facing; private customer business always has the priority.”
5. Many interactions with participants
The high customer orientation and the tailor-made offer lead to many necessary interactions with various participants, be it brokers, risk engineers, underwriters, branches, the legal or claims department, external service providers and of course the customer. In short, a loose network in which everyone communicates with everyone.
This communication produces valuable information, which, however, is only recorded in an unstructured and fragmentary form. The communication channels used are as diverse as the market participants and range from e-mail and Skype calls to faxes.
6. The human factor in underwriting
Even if individual business can be automated to a high degree, the human factor will always play a significant role in underwriting.
Michael Rüsch has put it in concrete terms:
„I do not believe that underwriting can be fully digitised.“
The underwriter will, in his view, become the data conductor; he remains a person of flesh and blood who must decide whether or not to accept a certain risk. Good news, we think.
Source of the quotes: Schweizer Versicherung, Issue No. 11, November 2017, page 12 & 13
About Consor Universal
With Consor Universal, specially developed for individual business, the balancing act between individualization and standardization is optimally carried out. Business can be conducted as flexibly and individually as necessary. At the same time, Universal manages the information in a structured and evaluable form. The underwriter receives guidelines for compliance with the underwriting guidelines, compliance aspects, clause selection, etc., in which he can navigate and make decisions freely. Business transactions are evaluated in detail and allow the responsible management to make decisions quickly. The complexity in product development can be drastically reduced by Universal’s special component design. Customer-oriented products can be developed quickly, instead of division-related products that only serve to improve internal processing. And last but not least, the cost-effectiveness of the IT solution is supported despite small quantities.