As the market hardens Insider Engage talks to Richard Gunn, chief revenue officer of hyperexponential at Insurance Insider’s London Market Conference to discuss the hardening market and the challenges with pricing risk.
A live poll during the conference asked participants a question about what the top three words on everyone’s mind were reflecting on the last year, and “hard market” was the top response.
“That's consistent with what we're seeing across our customer base. We work with managing general agents (MGAs), insurers and reinsurers and we're very much seeing that,” said Gunn.
“It's worth reflecting that there are some headwinds, however, not least of all the recent cat events, but also on the back end of Covid-19 and the Ukraine war.
“We're seeing a lot of uncertainty around inflation and the wider external market. It's about looking at the granular details, particularly from a pricing perspective and reflecting on how the different parts of the market are acting differently.”
Commenting on some of the discussions around the state of the market, Gunn explained: “We learnt this morning, for example, that directors’ and officers’ (D&O) rates had some downward pressure and is as much as 20% lower from a price perspective. The general consensus is that cat is only going to go on and continually harden.
Gunn also highlighted how there has been a lot of change in the past two years around how underwriters are using data.
He said: “The last couple of years there's been a lot of transformation around enabling the underwriter at the point of pricing to have as much data available to them as possible. So that's from internal systems, particularly a renewal.
“For example, they've got historical view of that risk but are also integrating with third party external data systems to make sure that underwriter has all the information that's available to make that decision in the best way possible.
“We're seeing the importance of insurers who make a decision to invest in cyber and are able to build and deploy models to get them in the hands of their underwriters as quickly as possible,” said Gunn.
“Inflation is a hot topic and it’s important that from a pricing perspective that insurers can bake that into the point of pricing as soon as possible, so they're protecting that loss ratio or hopefully improving that loss ratio in line with the hardening market.
Gunn also explained the impact capacity tightening is having on pricing and what action insurers need to take. “Step one is to sort out your own data house. For insurers who don't see the value in that, they'll very quickly find value in that in three or four years time and their competitors are using the data that they're amassing today to make better decisions.
“But what we're also seeing is with capacity tightening throughout the market, whereas that’s insurers to MGAs, or the reinsurance to insurance threshold, we're seeing increased competition for capacity.
“If you look upwards there is more of an emphasis on the quality of data that either an MGA or an insurer can provide to their insurer or reinsurer respectively.
“It's about not just building that database and making sure that you're making the best pricing decisions but demonstrating how you can pass on that data visibility to give your capacity provider as much confidence as possible.”
Click here to read hyperexponential's latest report on digital transformation in insurance pricing.
