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Disaggregation of Insurance Processes on the Horizon
This article is part of Carrier Management’s series on the Future of Insurance.
Vikram Sidhu, Partner, Clyde & Co, sees disaggregation of data handling and analysis functions as one potential future trend that will emerge in the next decade as the industry ramps up its use of big data.
Vikram Sidhu, Partner, Clyde & Co
Q: What major changes do you see on the horizon for the property/casualty insurance industry in the next 10 years? What will insurance companies, insurance leaders, the industry and its workforce look like in the next decade? What risks will they insure?
Sidhu (Clyde & Co): Big data will bring the most dramatic changes to the future of the property/casualty insurance industry. It is already having a dramatic effect on the underwriting and management of risk, although primarily on the consumer side of the business for now. The influx and increasing use of big data will bring new players and risk markets to the insurance industry.
“Disaggregation will mean…that the industry will split into specialists who will collect data; others who will analyze and build models using that data; those who will use the analyzed data and models to provide underwriting expertise; and yet others who will assume the risk and hold capital…“As the insurance industry ramps up its use of big data, it will likely lead to disaggregation of the industry. What that disaggregation will mean is that the industry will split into specialists who will collect data; others who will analyze and build models using that data; those who will use the analyzed data and models to provide underwriting expertise; and yet others who will assume the risk and hold capital for it based on the collection, analysis and modeling as well as underwriting expertise of others. Of course, it will still be possible to keep all or most of those aspects under a single “roof.” However, as we are already seeing in the industry with respect to collection of big data, which is often sourced from non-insurance players, it will be more efficient to disaggregate.
Disaggregation will also allow a further deepening of the presence of so-called “alternative capital,” which has already been making its presence felt strongly in the insurance industry. With greater access to the analysis, modeling and underwriting tools using big data collected by data vendors, such alternative capital will be able to go deeper into the insurance space without needing to rely as heavily on the existing insurance industry players.
With greater access to the analysis, modeling and underwriting tools using big data collected by vendors, alternative capital providers will be able to go deeper into the insurance space without needing to rely on existing insurance industry players.The regulators’ response to the collection and use of big data in the insurance industry will, of course, help determine the course of the big data’s effects on the industry. Regulators in the U.S. and elsewhere are working hard to understand the collection and use of big data in the insurance industry (such as through the NAIC’s Big Data Working Group) as well as to consider regulatory responses, including changes to laws and regulations, that might be needed. Although those regulatory efforts have focused on consumer business thus far, they are likely to branch out to commercial business in the near future as well.
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- Vikram Sidhu, Partner, Clyde & Co
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