In this feature Andy Yeoman, CEO of Concirrus, explores the transformative potential of big data and analytics in marine insurance, detailing how they can be utilised to refine risk assessment processes and achieve up to a 25 per cent improvement in loss ratios.
“The measure of intelligence is the ability to change”, observed Albert Einstein. It is a quote that holds deep significance in a modern era where over 2.5 quintillion bytes of data are created daily. The arrival of big data demands adaptability and evolution in marine insurance. When combined with the rapid advances of artificial intelligence (AI), the industry finds itself on the cusp of a transformative shift.
If harnessed effectively, such a colossal influx of data could serve as a cornerstone in revolutionising risk assessment processes while significantly improving loss ratios. The question is, how can we navigate this vast ocean of data and yield these actionable insights?
By transitioning from a ‘spotlight’ approach focusing on specific issues, to deploying a ‘floodlight’ that illuminates the broader landscape of risk, we can discover trends and insights that were previously unknown.
From traditional methods to data-driven insights
Until recently, the marine underwriters relied heavily on information disclosed by a broker and their specific knowledge of the market to assess risk, shining a figurative spotlight on limited aspects of a vessel’s profile. Today, big data allows us to expand this view and build a behavioural profile, which is more akin to a floodlight using the data now available. This ‘floodlight’ approach not only reveals a wealth of previously unseen information, but also offers us a more comprehensive understanding of the complexities of marine risk.
Traditional methods meant insurers worked within limiting factors such as the age of the vessel, its construction location, and vessel tonnage. Today, with contemporary solutions – we get to delve deeper. We can scrutinise behavioural patterns, examine operational histories, see the ship management history, and even stream real-time location data from onboard systems.
However, there’s not a week that goes by where data now becomes available that potentially makes known what was previously unknown or unknowable.
Moving from declared risk to observed risk
This wealth of information provides insurers a paradigm shift from static, historical assessments to more dynamic, predictive analytics. Such a granular understanding allows insurers to tailor their policies more effectively, aligning risk with premium, and enhancing overall portfolio performance.
As a result, insurers can now build portfolios, that are appropriately priced and perfectly managed – which in turn, provides smooth sailing to crucial improvements in loss ratios.
Technological innovations at the helm
We are at the forefront of adopting advanced technologies to fully harness the full potential of big data. I can tell you from firsthand experience that innovations, such as predictive algorithms for vessel movements and anomaly detection in Automatic Identification System (AIS) data, are pivotal in transforming this raw data into actionable insights.
It is these tools that feed the AI that enables insurers to make informed decisions at speed, enhancing their responsiveness to sudden market changes and emerging risks.
Overcoming challenges in big data analytics
But it wasn’t all smooth sailing – the journey to leveraging big data was laden with challenges, particularly concerning data integrity and usability. We tackled these challenges directly, with one of our biggest challenges being the reliability of the underlining data, which continues to be scrutinised through sophisticated cleansing and validation processes.
Another significant hurdle was transforming this data into straightforward decision-making tools for the end user – we constantly ask ourselves, what are the decisions people are trying to make with our data? The key lies in enabling insurers to engage with the platform with confidence, providing them with valuable insights, and helping them make informed decisions with little consideration for the complexities of the underlying technology.
Through these efforts, our mission is to ensure that we can have a net positive impact on our customers’ business using data that is comprehensive, accurate – and above all, trustworthy.
The decision-making revolution
Data analytics & AI has revolutionised decision-making processes within the marine insurance industry. Insurers can now access real-time, comprehensive risk profiles, shifting from a reactive stance to a proactive, informed approach.
This evolution in decision-making is no longer theoretical, it is evidenced in the improved performance of our insurer customers, who leverage these insights to outperform market benchmarks consistently.
Client success stories and market impact
The tangible benefits of the Concirrus approach are mirrored in the success stories of our clients. Insurers equipped with these advanced analytics tools report enhanced underwriting precision, better risk selection, and improved portfolio performance.
Our clients have been able to underwrite with speed and accuracy. For example, just last year a client needed to undergo realistic disaster scenario (RDS) planning for the situation in the Red Sea. The client’s team was able to leverage our data to construct this complex scenario in under thirty minutes – a task that would have taken days using traditional methods.
Our strategic partnership with AEGIS London also exemplifies this impact. By overlaying behavioural data onto traditional risk models, the firm not only transformed their approach to marine insurance but also significantly enhanced their risk assessment capabilities, and ultimately, it’s business performance.
Our Quest platform has been pivotal for AEGIS London, enabling a discerning risk analysis that distinguishes between seemingly similar fleets based on behavioural data. Intriguingly, this advanced approach has since led to new business outperforming the non-renewing business by a staggering 55 per cent in terms of large loss frequency.
It is these achievements that underscore the value of a data-driven approach. Our job is simply to help insurers do theirs with a combination of speed and accuracy.
Navigating the future
Looking ahead, the role of complex varied data in marine insurance will undoubtedly continue to evolve. We live in a world where the amount of data is increasing exponentially, and yet the expectation is that we can understand it and leverage this in ever-shortening periods of time. Only technology – specifically big data and AI – can provide the answer here. This will provide the ‘floodlight’ to further refine our industry’s capabilities.
We sit at the forefront of these developments, tirelessly searching for new, innovative data sets and exploring new ways to leverage that data to create more resilient, responsive, and efficient insurance modelling.
We are not just simply adapting to the data-rich landscape of marine insurance – we are redefining it. We envision a future where our ‘floodlight’ approach to data not only illuminates risks more broadly, but also encourages further innovation in product development and delivery.
It is in this future, that I firmly believe data will continue to be the cornerstone of decision-making, and it will continue to challenge and drive the industry towards new levels of insight and efficiency.
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