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Baden-Baden 2022

Guidewire’s Clarke: turning industry systems into insights

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Harnessing data and analytics will help close the yawning protection gap for intangible assets, and ensure insurers remain relevant, says Charles Clarke, group vice president, Guidewire Analytics.

Guidewire is most associated with technology transformations at insurers, why attend a reinsurance event?

As one of the largest providers of technology to the property and casualty industry, Guidewire is in many ways the ‘heart and lungs’ of an insurance company. If you buy an auto policy in the UK, for example, it is likely that quotation, billing and policy administration will be processed by Guidewire products and systems. If you have an accident, it will probably be adjusted, administered and paid through Guidewire’s claims system. In the US each year, Guidewire powers an estimated 2.2 billion transactions. I believe that makes us the de facto system of record for the insurance industry.

Rather than just administer those 2.2 billion transactions, we believe we can positively influence them, and we created our Guidewire Analytics business unit to help the insurance and reinsurance industry do just that. It is also why we attend reinsurance industry events like Monte Carlo and Baden Baden.

What exactly can Guidewire offer the reinsurance industry?

Influencing risk is much more interesting to reinsurers than policy administration. A reinsurer with 6,000 cedants does not need a core system the way an insurer does, but they do need analytical tools to explore data – that’s your data, our data, the market’s data.

Your data is the policy and claims information you have, that you can use analytics to get more regular granular access to it. Our data is third-party data gathered from public, private and government sources. Market data is where we run a data cooperative -- providing anonymized, aggregated benchmark data and then analytical tools, machine learning, AI solutions and integration gateways for our customers. When you put those three sources of data together with analytics, it’s really quite powerful.

We want to turn the industry’s system of record into a system of insight, increasing (re)insurers return on investment in analytics, and help them make more informed decisions.

Could you describe the reinsurance market today from a technology perspective?

There has been an awful lot of investment by the (re)insurance industry -- probably tens of billions of dollars – on software and technology, yet the return on investment is not always clear. Property cat is probably the most relevant area where you could calculate the return on investment in modelling. Post Hurricane Andrew, you could argue that the development of catastrophe models facilitated much of the growth in the property cat market since that market changing event in 1992.

Yet, I see an industry continuing to grapple with technology – being good at point-in-time analytics but struggling to embed data into workflows and processes for underwriters or claims adjusters. This is, however, a key benefit that a system of insight delivers – the ability to provide real-time actionable intelligence, directly to underwriters and claims professionals exactly when they need it most. We can’t provide every analytical answer under the sun, but we can make analytics accessible and easier for everyone to use.

What's the biggest challenge facing reinsurers today?

My personal belief is that it is a quest for relevance to cedents, and even to the end insured.

In 1984, physical assets accounted for 84% of the value of S&P 500 market capitalization. It was stock, it was property, it was the things that you could pick up and move. Just 16% were intangible assets. Fast forward to 2014, and that has almost perfectly inverted -- over 83% of the market capitalization of the S&P's 500 biggest companies was made-up of intangible assets – brand, IP networks, data -- and 17% just are physical assets.

I don't know the insurance industry has a good way of addressing that. Cyber insurance absolutely addressed assets that can be classed as intangible, but it's not that big. The global DWP for intellectual property insurance is just $70 million.

There's a gap. There’s a quest for relevance, and again, it's why we believe we can help reinsurers. If you want to insure a digital asset, you first need to describe that asset. That is why we, and other technology companies, strive to provide the data that insurers will need to make currently uninsurable assets insurable.

Autonomous vehicles are another good example. How do you insure an autonomous vehicle? Is it general liability, is it cyber? A broker recently predicted that autonomous vehicles could create a class of cyber business worth $250 billion of premium by 2050.

Where are you seeing opportunities for growth?

I believe the (re)insurance industry can grow by creating the conditions for innovation. And that is where data and analytics come into it.

To really compete in this market, (re)insurers will need smart systems—systems of insight-- that allow them to quickly adapt coverage, and that utilize parametric triggers that settle claims in a user friendly fashion.