This incident speaks to the importance of ensuring your information is accurate when the consequences are significant. I will modestly recognise that an MGA’s profitability is not quite as significant as a nuclear war; but when it comes to ensuring quick reaction to drive profitable performance, high quality and timely data is a key component of any MGA business.
Often for a carrier, the line of sight on performance is either unclear or delayed if there isn’t effective provision of data from an MGA. It is therefore key to ensure there is a constant high quality flow of the various forms of data that work together. In the case of Lt Col. Petrov a large part of his decision making was the lack of evidence in a secondary source of ground radar data.
The flow and level of data within MGAs can be complex and compromised without the discipline of a large scale policy administration system. MGAs must ensure they have the right type of information, accurately and consistently delivered to the carrier. Quite often this can mean removing the superfluous and focussing on what is really needed by all parties. While timing may be managed, inaccuracy and inconsistency make it much harder for all parties to decide whether the red button needs to be pressed.
The nature of the MGA model – specialist products, niche segments, unusual distribution models, etc – often means the ability to drive this accuracy is compromised. With a model spread over outsourced third party administrators and brokers, various systems and processes for data capture will be used. This calls for careful planning at the stage of establishing the operational model. It would be a positive step for these parties, alongside the MGA and carrier, to understand the critical role they have in providing accurate, timely information. A broker’s mind can be focussed if they understand the impact on their premiums and volumes of the accuracy of their input.
Finally through all of this vital area I would encourage MGAs and carriers to work together on the whole data journey. Initial agreement on the format, usage and timing can mean both can go into a relationship with eyes wide open and often save longer term pain. That said, there will always be a need for ongoing monitoring and improvement and again there should be a joint responsibility to question the data and compare results.
If all the data is available and something doesn’t look right, it usually isn’t. As, thank God, Stanislav Petrov knew.
There has been a lot of speculation recently around the use of AI in insurance and how this signals the death knell for Underwriters. Having mopped up the coffee that I spat out and checked my life insurance provisions, this got me to thinking. Surely not all underwriters? But if not, then who?
The ineffable question of the “effs”. What should a business aim for – and more specifically, for us, the underwriting function in an insurance business – efficient operations or effective decision making?
We have all heard of the boiling frog syndrome which says: if a frog is put in boiling water, it will jump out to protect itself. However, if you place a frog in cold water and slowly turn up the heat, it won’t notice the subtle increase in temperature and be boiled alive.
Game theory aims to shed light on outcomes where multiple actors operate. Dry academe often assumes “ceteris paribus” even in social sciences, but in the real world when we are trying to anticipate the outcomes of decisions one actor makes it is essential to consider the possible and likely responses of other actors…
In various parts of our lives, we are examined and tested to grade our ability and knowledge, be that driving tests, ‘A’ levels, or piano exams.
And so it is with the insurance industry. Boards and regulators are increasingly pushing for demonstrable oversight. This is especially true in the field of Delegated Authority (DA)…
Managing General Agents (MGAs) provide insurers a broad opportunity for profitable growth. Operating in niche sectors with lean efficient models and providing customers with products that they often find hard to come by in the mainstream. All of this is wrapped up with the relevant expertise and providing insurers with access to markets that…
As 2022 was drawing to a close, insurers across the UK were starting to look at their results, keeping their fingers, toes and everything else that they could, crossed in the hope that December would fizzle out in a whimper.
But alas it was not to be as temperatures plummeted and the industry suffered…
What use statisticians and actuaries when the world is being transformed by modern data-analysis techniques? What hope for clunking humans in the era of Big Data (Facebook sells data which influences US presidential elections), of Artificial Intelligence (China can identify disliked racial groups through automatic facial recognition technology)…
Catastrophes – natural events where one “system” (wind, earthquake etc) causes multiple insurance claims in one go – are difficult. Much else in insurance pricing is subject to conceptually simple averaging-over-time, but cats are different. You can’t take a 5 or 10 year history of natural-peril losses and assume you have an accurate view of exposure to catastrophes…
In part 1 of this triptych on insurance pricing we looked at Technical Price (TP): what must be covered over the long run to make reasonable profits. I finished that note by considering TP in the context of the market. Here, I take this theme further and explore more how to think strategically about pricing.
This note covers the fundamentals: the three building blocks of a technical price and a note on the role technical price plays. It is followed with a deeper look at pricing strategies. Finally we consider a knotty topic, cat(astrophe) pricing, in particular the use of cat models to inform the price.
Charles Dickens opened A Tale of Two Cities with these lines, contrasting calm enlightenment London with turbulent revolutionary Paris: “It was the best of times, it was the worst of times…
Calibrant was established to bridge a gap. The gap is that between MGAs and their carriers. And it finds many forms.