In today's cutthroat business environment, it takes more than just industry knowledge and expertise to stay on top. Many businesses are turning to technology to give them a competitive edge. Anne Loxton reports on how the reinsurance industry has taken advantage of technology.
Reinsurance companies are open to using technology to its full advantage; investing in innovative systems and equipment when other industries may not be willing to take the chance. This is due, at least in part, to the fact that reinsurance involves a lot of data - companies need to get it, analyze it and be able to work with it once they have it - and technology is constantly being improved and adapted to keep up with industry expectations.
Today's technology can conduct analyses and calculations that in the past were not even considered as a possibility. It can integrate many systems when companies merge, collect mind-boggling amounts of information and provide averages and summaries in a matter of minutes. It is even helping the reinsurance industry to second guess Mother Nature by determining the probability of disasters through exposure modelling.
Armed with the right technology, therefore, reinsurance companies can make risky business decisions. And with the right model or application, one company can have a definite advantage over the competition in terms of accuracy and timing.
But how does a company gain such an advantage, when available technology is available to everyone else? You use what is available better than the rest, by adapting applications or developing your own.
For some companies, this may require starting from scratch. Old equipment and legacy systems need to be replaced with larger, faster machines and networks. Other companies already have the technology, but not the software. For some the answer may simply be adopting a new way of manipulating the applications they already use.
Exposure modelling is a good example of how companies can use existing applications, or develop their own to gain a competitive edge. Commercial models are available for exposure modelling, and most reinsurance companies take advantage of these models. The drawback, of course, is that they are available to any organization, making it essentially a level playing field.
The trick is to have one of these adapted, or have a custom one developed. This allows you to manipulate data so you get the answers you need in the time you need them.
Companies in Bermuda use the commercial models, but also enhance their results by developing customized models. Renaissance Reinsurance of Bermuda has developed a program to allow them to leverage the information available to them to make smart business decisions.
“We decided to go with a custom application in addition to the commercial models so we could build it around our corporate risk model,” says Bill Riker, president and chief operating officer of Renaissance Reinsurance. “This model allows us to make complex business decisions faster than the competition. The effect is we can analyze deals, assess the risk return profile and provide excellent service to our producers.”
Renaissance Re's model enables them to make decisions on writing business faster than other models. This is possible in part because the analysis does not always require as much detail as some commercial models, while at the same time providing a greater array of output analyses. Most exposure modelling systems work on a policy level, basing calculations on individual policies in a given area. Depending on the line of business and the characteristics of the book being analyzed, this level of detail may not add much value to the analysis. Because of the amount of information being calculated, a lot of time is required to conduct the policy analysis - often more time than companies care to wait.
Renaissance Re's customized model uses information from most of the commercial models to get an idea about potential risks. This gives them the answers quickly and accurately enough to allow them to calculate the potential cost of accepting the policy. Ultimately they can write more business with an attractive risk/return profile because they have the answers they need while the competition is still waiting for a full analysis.Commercial models also have built-in biases that can skew results. The custom approach, on the other hand, provides a better estimate because it takes a number of commercial models and in effect, averages them out - providing a more balanced result.
“You can get three different answers from three different models,” says Mr Riker. “When we convert the data to the Renaissance format, we get the sum of information from all the various vendors.”
The information attained from the Renaissance Re model is also presented in a consistent, easy to digest format. The information can be quickly reviewed and a decision made in a very short time.
Any type of software can be developed to suit the reinsurance industry's unique needs, including process automation, electronic trading, and information transfers between offices or competitors via secure information networks. Whatever you have in mind, an expert can likely design a system that addresses your current requirements, and can be fashioned to conform to changes in the industry and technology upgrades.
The investment in a custom model pays for itself by being more precise and providing information specific to your needs. Once complete, a custom model is easier to use and more flexible, allowing for updates and changes to incorporate new technologies and new information sources. It can also be customized as needs shift, so it is always current.
Database analysis and reporting
Sometimes gaining an edge with technology simply requires better manipulation of available data. Databases holding your information can be programmed to provide specialized reports. Some companies with systems such as Oracle and Sequel Server can make better use of their existing system by adding new reporting features.
Many companies use these applications only for the uses for which they were purchased. There are many applications for the information in a database, and to take advantage of it merely requires the development of new reporting methods. A database expert can design any type of report, and many can provide insight from previous experience to suggest uses that you may not even consider.
Databases can be a very powerful tool for information intense industries like reinsurance,” says Jeanne Meunier, Oracle specialist and data administrator at the CCS Group. “Manipulating the data can arm you with more relevant information for making business decisions. The key is to be able to get to the relevant information quickly.” This requires setting up your data properly, and selecting tools that will help you access the data easily.
Examples of how the reinsurance industry has taken advantage of technology by adapting and developing programs provide an astonishing range of possibilities. Today's technology is so advanced, it can perform functions that most of us wouldn't even consider as a possibility. The key is to think outside the box, look at all the options and choose a way that you can make the technology work for your organization.
The important thing is to remember that technology is ever-changing and it is essential to choose the most powerful systems that can be upgraded and continually adapted as technology advances or your needs evolve. An investment in the right technology is more than the cost of doing business - it's an investment in gaining a competitive edge now and in the future.
Anne Loxton is marketing manager at the CCS Group in Bermuda. CCS is a business communications technology company offering advanced solutions in software development, networking, cabling, and voice and data services.