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Benchimol: age of ‘bionic underwriter’ nears

Industry insights: David Brown, left, senior partner for EY Bermuda, Albert Benchimol, president and CEO of Axis Capital, and Mark Geoghegan, managing director of The Insurance Insider (Photograph by Scott Neil)

“Bionic underwriters” could soon be transforming the insurance industry, combining experienced judgment and human ingenuity, but supported and enhanced by the speed and strength of technology.

That was a vision expressed by Albert Benchimol, chief executive officer of Axis Capital, as he spoke about the opportunities and challenges faced by the industry.

As he explained the possibility of creating what he termed “bionic underwriters,” he said: “There will always be risk that requires significant amounts of individual underwriters to make judgments.

“But increasingly as we take advantage of artificial intelligence and data, more and more risks will be underwritten by algorithms. That’s going to be much cheaper and much quicker, and we will be able to give our customers a better experience.”

He was the keynote speaker at the EY Global (Re)Insurance Outlook forum, held in association with The Insurance Insider, at the Hamilton Princess.

Mr Benchimol said the industry had to adopt technology and improve its value proposition for customers, because if it did not then someone else would.

“Our industry needs to take advantage of data analytics and insurtech. These two items are going to change the game.

“If legacy players in our industry are prepared to adopt technology and analytics, we can move the industry forward in a way that will protect our position and allow us to add value, and absorb technology and disruption rather than fall victim to it.”

Describing the enormity of change now happening, he predicted that between 2015 and 2025 the insurance industry will see more change than in any decade during the previous century. He predicted it will create new paradigms and opportunities.

Two earlier sessions at the forum, which was attended by hundreds of delegates, had focused on innovation and challenges for the industry, including the need to control expenses and present better value propositions to clients. Mr Benchimol picked up on those themes and said his perspective was one of optimism, but that he also acknowledged challenges.

“The insurance industry’s claims paid and premiums as a percentage of gross domestic product [in US] have declined since the early 1980s. So clearly we are less relevant to the American economy than we were in the past.”

He said many risk managers and brokers felt the insurance industry had not developed new products to respond to emerging risks.

He also noted that this year is the third time in 13 years that the insurance sector has experienced catastrophe losses in excess of $100 billion.

Mr Benchimol said there were pools of unmet needs to address, adding: “We have great opportunities coming our way in data analytics and technology. We’ve been slow in developing new products, but it doesn’t mean we can’t do it.”

He gave examples, mentioning cyber products and flood protection.

On the issue of pricing, he believes the industry has allowed prices to go down too far in many lines, well below technical pricing.

“This industry needs to be more disciplined in pricing. I’m encouraged by what I’m seeing right now. The consecutive years of losses we have had and the recent spate of large cat losses are now leading to a correction in prices.”

He did not see a need to return to the hard markets of 1992, 1996 or 2002, but said the industry “needs an adequate return on capital, something I am defining as low double-digit return”.

Mr Benchimol also spoke about how the industry is perceived by some, and how it could improve its performance and potentially win new customers.

“Our product for many people is not considered great value. When you put all the policies together, the market gives us $100 and we give back to the market $50 or $60 in claims per year.

“The market sees that. What it does not see or perceive is the value in distribution, or the value in the loss adjustment expenses. That’s why a lot of governments and big businesses won’t buy insurance, because they think it is a bad deal.

“And that’s why I think the days of 50 or 60 per cent loss ratios are passed. We need to be offering a 70 per cent plus loss ratio, with a low 90s combined ratio.”

He said the way to achieving that was to use technology and optimise processes.

“We have to do that, or someone will do it on our behalf.”

And Mr Benchimol said that achieving a 70 per cent loss ratio would be viewed as a fairer pricing environment to many and likely attract more customers, including those who currently self-insure.