By Ruedi Wipf, CEO at Consor
Could fully automated underwriting soon be the future of industrial insurance?
In a survey conducted by Willis Towers Watson in March 2023, 45% of respondents stated that the industrial business is too individualized for risk assessment to be carried out in an automated process. However, 55% of respondents were of the opinion that largely automated underwriting would be conceivable in five years’ time due to increasing digitalization.
However, the reality in industrial insurance in 2024 is still completely different.
The degree of automation through software support is still low for many brokers and insurers.
Let’s take the example of industrial property insurance and assume that a medium-sized company with 20 locations in southern Germany needs property insurance for buildings and contents. In addition to the addresses, a large number of risk characteristics are collected for the 20 locations, such as flood zone, type of construction, fire alarm system, fire extinguishing system and much more. Depending on the type of business and insured risks, further risk characteristics are added for each location. Larger locations can be subdivided into individual areas – for example, production hall, warehouse and administration. This multiplies the number of risk characteristics to be recorded.
Often, all these data points are still collected manually – with paper and pen or in an Excel spreadsheet. As part of a tender, this data is typically sent by the broker to various insurers by e-mail. The most common “data formats” are Word, Excel, PDF or simply plain text in an unsecured e-mail.
Insurance companies have to manually process this unstructured flood of data. Many industrial insurers still work with Excel for risk assessment and pricing. Accordingly, the data received is manually typed from one Excel spreadsheet into another. This is not very efficient or digital – it is also error-prone and time-consuming.
Originally, the insurance industry was one of the pioneers in IT.
Back in the 1970s, insurance companies invested heavily in digitization, which was still called EDP at the time. So why is it that the level of digitalization is so low in industrial insurance today?
One key reason for this is the lack of standardization in data exchange. In principle, every industrial insurer collects and processes roughly the same data. In industrial property insurance, for example – as described above – flood zones, construction methods, operating modes, etc.. However, there is no comprehensive and widely supported data exchange standard and no corresponding data exchange platform yet.
The BiPRO e.V. association has covered the rating, offer and application (TAA) processes for private and commercial business with the 420 standards and has also standardized a description of the risk data with the 419 standards. These BiPRO 419 standards are actually only a shell – the specific data structures have not been worked out in detail. Accordingly, these standards are still largely unknown in industrial insurance and are hardly mapped in specific IT systems. Due to demand from the industry, BiPRO e.V. would like to revive the topic in a specialist group from Q1/2025. Affaire à suivre.
The Corify platform – a subsidiary of InsurTech company Hypoport – is taking a promising approach. Corify aims to enable a standardized and holistic risk description and thus a transparent market. The platform brings together the risks of the insurance industry with the requirements of insurers and brokers in a digital process. Corify has already come a long way with the specification and implementation of the platform and has already gained brokers such as Pantaenius and the fleet insurance service provider Auto Fleet Control as participants in the marketplace.
In addition to private-sector initiatives such as Corify’s, there is also movement at association level towards a standardized exchange of risk data.
At the beginning of September 2024, the General Association of the Insurance Industry (GVNW) announced that the RD-X project was about to be launched. RD-X stands for Risk Data Exchange. The aim of this GVNW initiative is to make the exchange of risk data between customers, brokers and insurers more efficient and secure. The aim is to develop a platform that enables the digital and standardized transmission of risk data. The focus is on increasing the efficiency of risk data exchange between all market participants.
However, we are not there yet. Under the leadership of the GVNW, an association will first be founded to finance and implement this project. The initiative of the insurance industry is supported by several large insurers and brokers. BASF, HDI Global SE, Swiss Re Corporate Solutions, Ecclesia Group, Zurich Insurance and Funk are among those involved.
Is this GVNW initiative in competition with Corify? No, on the contrary! It’s not just industrial customers and insurers who want standardized data exchange. Private-sector providers of software solutions are also hoping for corresponding standards and processes for the secure and automated exchange of risk data.
Only a cooperative, committed approach by all market participants can ensure that the opportunities of digitalization can be exploited in the medium term and that scanned, handwritten risk data does not have to continue to be sent.
